The government has marginally increased the interest rates for five of the 12 small savings schemes for the October-December quarter of 2022. According to the circular issued by the Finance Ministry on September 29 the interest rates for five small savings instruments have been increased between 0.1 per cent and 0.3 per cent. However, the government kept the interest rate for the Public Provident Fund (PPF) scheme unchanged.
The PPF interest rate is decided by the government every quarter in a financial year. This is the first time since January 2019 that the interest rates on small savings schemes have been changed. The last revision in interest rates on small savings schemes was effected for January-March quarter of 2019.
The PPF interest rate is set by the government every quarter. For the third quarter (Q3) of this Financial Year (FY), the Finance Ministry has decided to keep it unchanged at 7.1 percent. Similarly the interest rates for six other schemes including Sukanya Samriddhi Account, National Savings Certificate and five-year recurring deposits will remain unchanged.
While the interest on PPF deposits is calculated monthly, it is only credited to the account at the end of the financial year. The interest is computed form the 5th day till the last day of every month. Interest is calculated on the lower of the balances held on the 5th day to the last day of a month.
The PPF scheme has remained one of the most popular long-term saving-cum-investment products since its launch in 1968. The PPF scheme not just offers safety but also comes with tax benefits under Section 80C of Income Tax Act. The PPF remains one of the safest investment products out there because the Indian government guarantees one’s investments in the fund.
The deposits in PPF accounts can be made for 15 years and it can be extended by another 5 years at the request of the account holder. The depositors need to make a minimum investment of Rs 500 in a financial year to keep the account activated. Defaulting on this will result in the account being discontinued. The account can be revived by paying the fees and fine.
A PPF account can be closed or partial withdrawals can be made from the account only after 5 years from the date of the opening of the account. The premature closure or the partial withdrawal from the PPF account is exempted from tax.
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