PPF, NSC, SCSS, KVP, 5-year Post Office FD Interest Rate Cut: Check new small savings rates till June 2021

by Jeremy

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. 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 percent instead of 7.1 percent per annum, while for the Senior Citizen Savings Scheme, the interest rate has been fixed at 6.5 percent instead of 7.4 percent per annum. The 5-year Monthly Income Account Scheme will offer 5.7 percent instead of 6.6 percent payable monthly. On the 1-year time deposit, the interest rate stands at 4.4 percent, while on the 5-year warranty, the rate will remain 5.8 percent per annum.


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

Based on government yields, the government sets the interest rates on post office schemes for the next three months at the start of every quarter of the financial year. 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 interest rate remains fixed until maturity. However, investors of PPF and Sukanya Samriddhi Yojana (SSY) see a revision in the rate when the government revises the speed 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 most of them have a long duration, ensure you have liquid assets available to you before 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 sum contributed and hence took the highest safety on the entire principal invested.

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