PPF, NSC, SCSS, KVP, 5-year Publish Workplace FD Curiosity Price Reduce: Examine new small financial savings charges until June 2021

Bad news for the fixed income investors again. The government has cut the interest rates on post office small savings schemes for the three months ending June 30, 2021. The interest rate on PPF will be 6.4 per cent instead of 7.1 per cent per annum while for the Senior Citizen Savings Scheme, the interest rate has been fixed at 6.5 per cent instead of 7.4 per cent per annum. The 5-year Monthly Income Account Scheme will offer 5.7 per cent instead of 6.6 per cent payable monthly. On the 1-year time deposit, the rate of interest stands at 4.4 per cent while on the 5-year deposit, the rate will remain 5.8 per cent per annum.

The biggest cut is on the 1-year deposit where the new rate stands lower by 1.1 per cent now. The interest rate on post office savings account has also been cut from 4 per cent to 3.5 per cent. The 5-year RD scheme will get 5.3 per cent while Sukanya Samriddhi Yojana will offer 6.9 per cent per annum. The money in KVP will now double in 138 months ( 6.2 per cent) instead of earlier tenure of 124 months (6.9 per cent)

Based on government yields, at the start of every quarter of the financial year, the government sets the interest rates on post office schemes for the next three months. If at all there is a change, it does not impact all the post office schemes. For the investor who invests in NSC, KVP, Time Deposits, Senior Citizens Savings Scheme (SCSS), the rate of interest remains fixed until maturity. However, investors of PPF and Sukanya Samriddhi Yojana (SSY) see a revision in the rate as and when the government revises the rate at each quarter of any financial year.

Several post office schemes are the first choice of investors looking for fixed and assured income. Some of them also come with tax benefits under Section 80C of the I-T Act. All of them are sovereign backed investments wherein the principal invested and the interest earned are guaranteed by the government.

Before investing, make sure about the tax liability of the interest that you will earn on PO schemes as some of them may have a taxable interest. Likewise, as the majority of them have a long duration, ensure you have liquid assets available to you prior to locking funds for the long haul. Put funds into them by connecting to your long term requirements and keeping asset allocation across equity and debt into consideration.

Significantly, the post office schemes carry a sovereign assurance on the whole sum contributed and hence carry the highest safety on the entire principal invested.