The Finance Ministry announced the applicable interest rates for various small savings schemes. These rates came into effect on April 1, 2015 and are applicable for the current financial year spanning April 1, 2015 to March 31, 2016.
1) SCSS
The Senior Citizens Savings Scheme is for those aged 60 years and above. However, the age limit drops to 55 years for those who have retired on superannuation or under a voluntary or special voluntary scheme.
The interest rate is now 9.30% per annum, marginally up from 9.20% earlier.
A very good aspect about this scheme is that the rate of interest is calculated on a quarterly basis. On the flip side, interest earned is taxed. However, investors do get a deduction under Section 80C. Though the maximum investment limit is a very substantial Rs 15 lakh, the amount eligible for a deduction stays at Rs 1.50 lakh per annum.
The lock-in period is not too long at 5 years, which can be extended for an additional 3 years.
2) PPF
The Public Provident Fund tops the popularity list. The interest rate has remained unchanged at 8.70% per annum.
Though the interest rate is calculated annually, this is one investment that is tax free all the way. Investments up to Rs 1.50 lakh are eligible for a tax deduction under Section 80C. Interest earned is also tax free and exempt from tax on maturity.
The lock-in period is long, at 15 years, which can be extended in blocks of 5 years each.
3) NSC
The rates of interest offered on the National Savings Certificate have also been left as it is.
NSC VIII has a lock-in period of 5 years earning a rate of 8.50% per annum.
NSC IX has a lock-in period of 10 years. To compensate for the longer tenure, the rate increases marginally to 8.80% per annum.
The calculation of the interest rate in both cases is half yearly. Though investments get a deduction under Section 80C, interest earned is taxed.
4) SSA
A Sukanya Samriddhi Account offers a return of 9.20% per annum, up from 9.10% earlier.
Just like PPF, investments get a deduction under Section 80C and the interest earned is completely exempt from tax.
This account can be opened by a parent or guardian only in the name of a girl child and only till she attains the age of 10 years. The maturity of the account is 21 years from the date of opening the account. The exception being if the girl gets married before the tenure of 21 years has been completed.
5) 5-year term deposits
You can open a deposit at the post office and select tenures of 1, 2, 3 and 5 years. However, none give the tax benefit under Section 80C except the 5-year tenure deposit which offers a rate of 8.5% per annum.
The interest earned is subject to tax. Though it is payable on an annual basis, it is compounded quarterly.
Just like the 5-year deposit from the post office, tax-saving fixed deposits from banks are also eligible for a deduction under Section 80C. Do check with your bank to see what the rate of interest is.
