New Delhi, Apr 1
Less than 12 hours after slashing interest rates on small savings, Union Finance Minister Nirmala Sitharaman on Thursday withdrew the order claiming that it was an “oversight.’’“The schemes of Government of India shall continue to be at the rates which existed in the last quarter of 2020-2021, ie, rates that prevailed as of March 2021. Orders issued by oversight shall be withdrawn,” Sitharaman tweeted early in the morning.“Interest rates on small savings to be retained at level of fourth quarter of last financial year,” she said.The Minister reversed an order announced at 10 pm on Wednesday in view of the ongoing elections, said sources. This would have been the second blow for a large section of the population, especially the elderly and professionals, who either bank heavily on the interest from fixed small savings or put aside for the future in public provident fund. Interest rates on fixed bank deposits have already been falling in tandem with lower interest on credit by the corporate sector.In bad news for fixed income depositors, the Government cut the interest rates on a slew of such schemes including the post office small savings schemes for the three months and Senior Citizen Savings Scheme to 6.5 % from 7.4 % per annum.The interest rate on PPF has been cut to a 44-year low of 6.4 % from 7.1 % per annum while the five-year Monthly Income Account Scheme will offer 5.7 per cent instead of 6.6 per cent payable monthly.On the 1-year time deposit, the rate of interest stands will be 4.4 % while on the five-year deposit, the rate will remain 5.8 % per annum.
The biggest cut is on the 1-year deposit where the new rate stands lower by 1.1 %. The interest rate on post office savings account has also been cut from 4 % to 3.5 %. The 5-year RD scheme will get 5.3 % while Sukanya Samriddhi Yojana will offer 6.9 % per annum.
The money in KVP will now double in 138 months (6.2 %) instead of earlier tenure of 124 months (6.9 %).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.But there is no change till maturity for investments in NSC, KVP, Time Deposits, Senior Citizens Savings Scheme (SCSS).There is a provision in PPF and Sukanya Samriddhi Yojana (SSY) for a revision in the rate each quarter of any financial year.
Many post office schemes come with tax benefits under Section 80C of the I-T Act and all of them have sovereign backing.
