Small Savings Interest Rates FY 2021-22

• Posted By Amritesh
• On January 12th, 2022
• Comments: 15 responses

Small Savings Schemes interest rates has been retained for the 4^th Quarter of Financial Year (FY) 2021-22. The interest rate on popular Savings Schemes like Kisan Vikas Patra (KVP), Public Provident Fund (PPF) and National Savings Certificate (NSC) remain unchanged for the period 1^st January, 2022 to 31^st March, 2022. The interest rate has not been revised since 2^nd Quarter of Financial Year 2020-21. Government had decided to align the small savings interest rates with the relevant market rates of Government Securities. The rates are now recalibrated every quarter in order to maintain it at par with the current market rates. The repo rate since May, 2020 has remained stable at 4%.

The Government has refrained from interest rate cut for quite some time now, despite the crisis due to the pandemic. However, Small Savings Interest Rate for FY 2022-23 may go up as inflation is expected to rise in the coming months.

Government aims to provide a level playing field to the Banks by aligning the deposit rates to the market rates. Banks have reduced the interest rates on Term & Recurring Deposits since RBI has lowered the benchmark rate. The interest rates on Small Savings Schemes are marginally higher when compared with Bank deposit rates, plus tax benefits are also available on selected Small Savings Schemes. The Central Bank (RBI) had clamored for interest rate revision as it is leading to distortion in rate structure. However, it is a concern for the Small Savings Investors who rely heavily on these schemes. Savings Interest Rates FY 2021-22 is revised on quarterly basis.

Small Savings Interest Rates for Financial Year 2020-21

The most popular tax saving scheme Public Provident Fund (PPF) will earn 7.1% interest on deposits for the period ending 31^st March, 2022. Similarly, 5 Year National Savings Certificate (NSC) will earn 6.8% return on the investment. Small Savings Schemes such as PPF, NSC, SSY offer risk free return along with tax benefits to risk adverse investors. Small Savings Scheme is popular among individuals with low-risk appetite. The retention of interest rate is a welcome move for the Individuals relying on Small Savings Schemes. Any cut in the interest rate would have hurt the income of Senior Citizens as they have limited source of income and inflation further adds to their woes.

The Government announces the deposit rates across all Small Savings Scheme on quarterly basis. The current interest rates are applicable from 1^st January, 2022 till 31^st March, 2022. The interest rates are now determined at par with rates of Government Securities.

Small Savings Interest Rates applicable on various Schemes (Click on link below to read more about the Schemes)

Public Provident Fund (PPF): Investment in PPF will earn 7.1% return for the quarter ending 31^st March, 2022. Same as the previous quarter. The investment tenure is of 15 years. Premature closure of PPF account is allowed in genuine cases, such as serious ailment, higher education of children, etc applicable to accounts which have completed 5 years from the date of opening. However, a penalty of 1% in interest payable on whole deposit is imposed in case of premature withdrawal.

National Savings Certificate (NSC): The 5-year NSC will earn an interest of 6.8% on fresh investment made on or after 1^st April, 2020. The same will continue for the period ending 31^st March, 2022. The interest is compounded annually. The investment is eligible for deduction under section 80C. However, the interest earned is taxable on maturity.

Kisan Vikas Patra (KVP): KVP investment will fetch 6.9% return on fresh investment made on or after 1^st April, 2021. The interest is compounded annually. Maturity period is 124 months. The investment is not eligible for tax deductions and the interest earned is taxable at the time of maturity.

Income Tax Slabs & Rates for Financial Year 2021-22

Sukanya Samriddhi Yojana (SSY): Scheme introduced for empowerment of the Girl child will earn 7.6% interest on investment for quarter ending 31^st March, 2022. The scheme is available to the parents of a girl child. The investment is eligible for deduction under section 80C. The scheme offers best return amongst small savings schemes.

Senior Citizen Savings Scheme (SCSS): The interest rate offered to the senior citizen is a lucrative scheme, offering 7.4% interest on deposits. The scheme is aimed at the welfare of the senior citizens, retention of interest rate is a relief for the investors.

Post Office Schemes: Interest Rates on Post Office Term Deposits of 1 year, 2 years and 3 years will be 5.5% respectively in the last quarter of the current FY. Term Deposits of 5 years will earn interest at 6.7% for the concerned period. Monthly Income Scheme (MIS) will fetch 6.6% return on deposits. Savings deposit will offer 4% return on deposits.

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Wealthtech Speaks or any of its authors are not responsible for any errors or omissions, accuracy, completeness, timeliness or for the results obtained from the use of this information. This article is for informational and promotion purpose only. Readers are advised to research further to have detailed knowledge on the topic. It is very important to do your own analysis and consult your Financial Advisor before arriving at any conclusion.