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In a statement on Thursday, FinMin said, “The rates of interest on various small savings schemes for the quarter of the financial year 2022-23 starting from 1st July 2022 and ending on 30th September 2022 shall remain unchanged from those notified for the first quarter (1st April 2022 to 30th September 2022) of the financial year 2022-23.”
Here’s a brief glance!
Post Office Savings Account(SB): Here, an investor can earn up to 4% per annum. The minimum amount for opening the account is only ₹500. There is no maximum limit. Interest is calculated based on the minimum balance between the 10th of the month and the end of the month and allowed for whole rupees only. Under section 80TTA of the IT Act, from all savings bank accounts, interest up to ₹10,000 earned in a financial year is exempted from taxable income.
5-Year Post Office Recurring Deposit Account (RD): An interest rate of 5.8 % per annum (quarterly compounded) can be earned here on minimum deposits of ₹100 per month. There is no maximum limit.
As per the India Post website, maturity values for ₹100 Dn are:
– 5 Year = ₹6,969.67 after extension with deposit.
– 6 Year = ₹8,620.98
– 7 Year= ₹10,370.17
– 8 Year= ₹12,223.03
– 9 Year= ₹14,185.73
– 10 Year= ₹16,264.76
Post Office Time Deposit Account (TD): Here, the minimum deposit value is ₹1,000 without any maximum limit.
Notably, the interest rate is 5.5% each on a 1-year, 2-year, and 3-year time deposit. Meanwhile, the rate is 6.7% on a 5-year time deposit. There is also a tax benefit of ₹1.5 lakh under section 80C of the IT Act for a 5-year TD.
As per the India Post, on deposits of ₹10,000 – the annual interest is ₹561 on 1-3 year time deposits. While the annual interest earned is ₹687 for ₹10,000 deposits on 5-year TD.
Senior Citizen Savings Scheme (SCSS): Investors can earn 7.4% per annum under this scheme. There shall be only one deposit in the account in multiple of ₹1,000 maximum not exceeding ₹15 lakh. Interest is payable quarterly. Investment under this scheme qualifies for the benefit of section 80C of the Income Tax Act, 1961. However, interest is taxable if the total interest exceeds ₹50,000 in a financial year under the scheme, and TDS at the prescribed rate will also be deducted. Notably, there will be no TDS if form 15 G/15H is submitted and accrued interest is not above the prescribed limit.
As per India Post, the quarterly interest turns out to be ₹185 on ₹10,000 deposit.
Monthly Income Scheme Account (MIS): The interest rate here is 6.6% per annum. The maximum investment limit is ₹4.5 lakh in a single account and ₹9 lakh in a joint account. Interest shall be payable on completion of a month from the date of opening and so on till maturity. Interest is taxable in the hand of the depositor. The account can be closed on expiry of 5 years.
As per the India Post, on deposits of ₹10,000 – the monthly interest works up to ₹55.
Public Provident Fund Account (PPF ): The interest rate here is 7.1 % per annum (compounded yearly). The minimum investment is ₹500 and the maximum up to ₹1.50 lakh in a financial year. Deposits can be made in lump sum or in installments. The interest shall be calculated for the calendar month on the lowest balance in the account between the close of the fifth day and the end of the month. Interest earned is tax-free under Income Tax Act. Further, deposits qualify for deduction under section 80C of the Income Tax Act. The tenure is 15 years for the scheme.
Sukanya Samriddhi Accounts (SSA): The interest rate is at 7.6%. Meanwhile, the minimum investment limit is ₹250 and the maximum up to ₹1.5 lakh in a financial year. The deposit can be made maximum up to the completion of 15 years from the date of opening. Also, deposits qualify for deduction under section 80C of the Income Tax Act.
If a minimum deposit of ₹250 is not deposited in an account in a FY, the account will be treated as defaulted account. However, defaulted account can be revived before the completion of 15 years from the date of opening of the account by paying minimum of ₹250 + ₹50 default for each defaulted year.
National Savings Certificates (NSC): The interest rate is 6.8% on 5-year NSC. According to India Post, ₹1,000 grows to ₹1,389.49 after 5 years. That said, the minimum investment amount is ₹1,000 with a maturity period of 5 years and there is no maximum limit. Deposits under the scheme qualify for the benefits under section 80C of the IT Act.
Kisan Vikas Patra (KVP ): The interest rate here is 6.9% compounded annually. The amount invested gets doubled in 124 months (10 years 4 months). The minimum investment limit is ₹1,000 and there is no maximum limit.
Many expected small savings schemes’ interest rates to go up for the second quarter of FY23 due to rising government bonds owing to strong demand.
According to Trading Economics data, the 10-year yield of g-secs is around 7.45 %, while the 5-year yield is at 7.26% on June 30.
In line with Shyamala Gopinath Committee recommendations to ensure small savings schemes are market-linked, the Finance Ministry in March 2016, had announced instead of annual resetting of small savings schemes’ interest rates for the next financial year, the interest rates from now on will be reset every quarter based on the G-Sec yields of the previous three months.
In 2011, the Gopinath committee had recommended keeping small savings interest rates higher by 25-100 basis points from the average yields of government securities.
With the small savings schemes’ interest rates kept unchanged, are they attractive compared to bank deposits that have witnessed massive hikes in their interest rates since RBI started to hike repo rate?. Since May this year, RBI has hiked the repo rate by 90 basis points – taking the rate to 4.90%.
Here is the list of interest rates offered by major banks on their fixed deposits.
SBI:
From June 14, SBI is offering a 5.30% interest rate to regular customers on 1 year to less than 2 years tenure. The rate is 5.80% for senior citizens on the same tenure.
Meanwhile, the bank offers a 5.35% rate to regular customers and 5.85% to senior citizens on 2 years to less than 3 years tenure.
The interest rate is 5.45% for regular customers on 3 years to less than 5 years tenure, and 5.95% is offered to senior citizens for the same.
On 5 years and up to 10 years tenure, the rate is 5.50% for regular customers and 6.30% for senior citizens.
These rates are applicable on FDs below ₹2 crore.
HDFC Bank:
On FDs below ₹2 crore, HDFC Bank offers a 5.35% rate on tenures 1 year to 2 years for regular customers, while the rate comes at 5.85% for senior citizens on the same.
A regular customer earns 5.50% on their deposits maturing 2 years 1 day – 3 years. For the same period, senior citizens earn 6%.
The rate is 5.70% for regular customers on 3 years 1 day- 5 years tenure, and 6.20% for senior citizens on the same. Meanwhile, the rate is 5.75% for regular customers and 6.50% for senior citizens for 5 years 1 day – 10 years tenure.
An Additional Premium of 0.25% (over and above the existing premium of 0.50%) is also given to Senior Citizens who wish to book the Fixed Deposit of less than ₹5 crore for a tenure of 5 years 1 Day to 10 Years.
ICICI Bank:
On FDs below ₹2 crore, ICICI Bank offers a 5.35% rate on deposits maturing from 1 year to 2 years. A senior citizen earns 5.85% for the same period.
Meanwhile, for regular customers, the rate is 5.50% on 2 years 1 day to 3 years tenure; 5.70% on 3 years 1 day to 5 years; and 5.75% on 5 years 1 day to 10 years tenure.
A senior citizen earns 6% on 2 years 1 day to 3 years tenure; 6.20% on 3 years 1 day to 5 years; and 6.50% on 5 years 1 day to 10 years.
Resident Senior citizen customers will get an additional interest rate of 0.25% for a limited time over and above the existing additional rate of 0.50% per annum for above 5 years tenure.
