Rate of interest on various small savings schemes for the financial year 2013-14 effective from 1-4-2013, on the basis of the interest compounding/payment built-in in the schemes, shall be as under :

Deposits up to Rs.1 lakh in NSC qualify for Deduction Section 80C of the Income Tax Act. Accrued interest on NSC also qualify for deduction u/s. for first five years. NSC interest is taxable. However, as it is a cumulative scheme (e.g. interest is not paid to the investor but instead accumulates in the account), each year’s interest for the first 5 years is considered reinvested in the NSC. Since it is deemed reinvested,

Provident Fund (PF) & Voluntary Provident Fund (VPF: PF is automatically deducted from your salary. Both you and your employer contribute to it. While employer’s contribution is exempt from tax, your contribution (i.e., employee’s contribution) is counted towards section 80C investments. You also have the option to contribute additional amounts through voluntary contributions (VPF). Current rate of interest is 8.5% per annum (p.a.) and is tax-free.

Based on the recommendations of Committee for Comprehensive Review of National Small Savings Fund, Central Government had recently issued two notifications on 25th and 29th November, 2011 which come into force from December 1,2011. The new savings regime offer better returns than ever and compared to other investments, offer adequate post tax return and maximum security to the principal amount invested. So if one is willing to invest in fixed income instruments, better to choose one from Government’s saving plans .

Section 80C replaced the existing Section 88 with more or less the same investment mix available in Section 88. The new section 80C has become effective w.e.f. 1st April, 2006. Even the section 80CCC on pension scheme contributions was merged with the above 80C. However, this new section has allowed a major change in the method of providing the tax benefit. Section 80C of the Income Tax Act allows certain investments and expenditure to be tax-exempt.

The maturity period for Monthly Income Scheme (MIS) and National Savings Certificate (NSC) will be reduced from 6 years to 5 years.A new NSC instrument, with maturity period of 10 years, would be introduced. Kisan Vikas Patras (KVPs) will be discontinued.The annual ceiling on investment under Public Provident Fund (PPF) Scheme will be increased from Rs. 70,000 to Rs. 1 lakh.Interest on loans obtained from PPF will be increased to 2% p.a. from existing 1% p.a.Liquidity of Post Office Time Deposit (POTD) – 1, 2, 3 & 5 years – will be improved by allowing pre-mature withdrawal at a rate of interest 1% less than the time deposits of comparable maturity. For pre-mature withdrawals between 6-12 months of investment, Post Office Savings Account (POSA) rate of interest will be paid.

Interest Rates on Small Savings Instruments (i) The rate of interest paid under Post Office Savings Account (POSA) will be increased from 3.5% to 4% p.a. (ii) The rate of interest on small savings schemes will be aligned with G-Sec rates of similar maturity, with a spread of 25 basis points (bps) with two exceptions. The spread on 10 year NSC (new instrument) will be 50 bps and on Senior Citizens Savings Scheme 100 bps. The interest rates for every financial year will be notified before 1st April of that year.

The Public Provident Fund is the darling of all tax saving investments.No wonder! You invest in it and you get a deduction on your income. Besides, the interest you earn on it is tax-free. Since it is a scheme run by the Government of India, it is also totally safe. You can be sure no one is going to run away with your money. Here, we summarise the scheme, tell you how to open a PPF account and what to expect.

The Committee, while conscious of the multiplicity of schemes, recognised that most of the schemes serve the thrift needs of various sections of the population, especially small savers. It has, therefore, recommended closure of only one existing scheme – the Kisan Vikas Patra (KVP) while recommending continuation of all other schemes with suitable modifications.

Committee for Comprehensive Review of NSSF Submits its Report to Union Finance Minister Recommends Discontinuation of Kisan Vikas Patra and Continuation of other Schemes with Suitable Modification(s); Recommends Reduction in the Maturity Period of Monthly Income Schemes and NSC. It also Recommends upward Revision of the Ceiling on Annual Subscription in PPF from Rs. 70,000 to Rs. 1 Lakh and Revision in Rate of Interest in Post Office Savings Account from 3.5% To 4% .