Small Saving Schemes Interest Rates from 1-Apr-2016
Last week, Govt. of India has announced revised interest rates for small saving schemes which are effective from 1-Apr-2016 i.e. Financial year 2016-2017. As per the suggestions from RBI, Govt of India has reduced Small Saving Interest rates to bridge gap between rates offered in small saving schemes vs banks. In this article, I would list down the instruments where interest rates got affected and also complete list of revised interest rates for small saving schemes. These revised interest rates are effective from 1st April, 2016 and are valid till 31st March, 2017 (Financial year 2016-2017) unless specified.
Also Read: Best Small Savings Schemes to invest in India
Small Saving Scheme Interest Rates from 1-Apr-2016 (FY 2016-17)
Here are the changes in small saving schemes. Interest is compounded now annually instead of bi-annual in all saving schemes.
1) Post office term deposit rates are reduced from 8.4% to 8.15% (1 year, 2 years and 3 years term deposits)
2) KVP interest has been reduced from 8.4% to 8.15%. Earlier, your money used to double in 100 months, but now you need to wait for 104 months to double your money under this scheme.
3) 5 Years recurring deposit interest rates are reduced from 8.4% to 8.15%.
4) Employee provident fund interest rate is increased from 8.75% to 8.8%.
5) No change in interest rates for schemes like Sukanya Samriddhi Account, Senior Citizen Saving Scheme and the 5 Year NSC.
6) Some of the small saving schemes interest is now market linked. Schemes like 1 to 3 years Post office Term Deposits, KVP and 5 years RD are now linked to Govt. Securities, where interest would be reviewed every 3 months and interest rate would be announced 15 days in advance. Means for Apr to Jun quarter, by 15th March, the interest rate would be announced.
7) Long term instruments like Post Office MIS, PPF, Senior Citizen Small Saving Schemes, 5 Year NSC, Sukanya Samriddhi Account interest rates are not linked.
Where should you invest your money after reduction in interest rates in small saving schemes?
- Though there is reduction in Post office term deposit for 1 to 3 years, let us compare it with top bank fd schemes. SBI Offers 7.5% interest rates compared to Post office, which offers 8.15% interest rates. If you invest ₹ 1 Lakh in SBI FD for 2 years, your maturity amount is ₹ 115,563. Whereas if you invest ₹ 1 Lakh in Post office 2 years FD scheme, your maturity would be ₹ 117,506. Means you would still get higher interest in the post office, though there is a reduction in interest rates. Read my article on why post office term deposit is better than bank FD scheme.
- If you want to double your FD, banks offer 7% to 7.5% where it would take at least 115 months to double your money. In post office KVP, it takes 104 months. Though there is a reduction in interest rate, still KVP is beneficial compared to bank FD schemes.
Also Read: You can get safe and regular fixed income from Post office Monthly Income Scheme (POMIS)
Complete summary of schemes with the old rate and revised rate (effective from 1st April, 2016)
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Suresh
Small Saving Scheme Interest Rates from 1-Apr-2016
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Meri maa ne 16th march 2016 ko 700000 rs ki fd ki thi senior citizen hai maa ne 16th june ok withdraw krne ka mann kiya to oosko kitna total amount milega
NSC Interest rates have been wrongly shown at 8.5 % whereas it has been reduced to 8.1% wef 1.4.16.
plese Advice sukanya scem
watis the intarest Rate??/
for senior citizens savings scheme quarterly interest paid works out to 8.4% only. can u enlighten me
No Sankaranayarayan, It is 9.3% and not 8.4%.
Hi,
Are any of these schemes are tax free? If not, can you indicate best bet for less tax.
Thanks,
Venkat
Only PPF interest is tax free
hi suresh ji,
I have deposited 5L in KVP in Jan2016. so my investment will be doubled in 8yrs 4 months as per previous interest rate OR will be doubled in 8yrs 9 month as per new interest rate ? pls clarify. thanks.
It would be doubled as per the KVP document given to you. All these new rates would be effective from 1-Apr-2016. Means if you buy them fresh after 1-Apr-2016, these new rates would be applied
Hi Suresh,
I want to invest 200000 per year please let me know where can i invest so that i can get very good return in coming 15 years..
Please help Thanks Elina
It depends on your risk appetite. If you do not want to take risk, invest in PPF for Rs 1.5 Lakhs per annum. You can open PPF account in your spouse name and invest balance 50K also in spouse name. You can get 8.7% tax free interest for 15 years. If you can take some risk, consider investing in mutual funds. Invest in top funds which I indicated in my previous articles.
Hi Suresh, First of all thanks for the regular flow of articles you keep sending. Love its simplicity and purpose. One observation here.The EPF interest rate change from 8.75 to 8.80% is for the FY 2015-16 and not for FY 2016-17. Hence we are still not sure of the interest rate effective 1st April 2016 as of now, but we know that we would be getting 8.8% for our EPF for the FY 2015-16. Please correct me if I am wrong…Thanks
Thanks for the info Sir
Thanks for the valuable information.