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CLARIFICATION ON INTEREST RATES ON SMALL SAVINGS SCHEMES

PRESS RELEASE, DATED 4-1-2012

Ministry of Finance has clarified that although the rate of interest on small savings schemes will be aligned every year with rates of Government securities of similar maturity, with suitable spread, the rates are fixed and not floating so far as individual investments except PPF are concerned. This is in response to news items appearing in certain sections of the Press that the interest rates on small saving schemes, revised by the Government w.e.f. 1.12.2011, are floating rates, which will undergo change according to fluctuations in the yield on the Government securities.

It has been clarified that the rate prevailing at the time of investments will remain fixed and unchanged till the maturity of the investment. Any revisions in interest rates in subsequent years will only be applicable to the investments made in the relevant period. For instance, investment made in an instrument other than PPF on 1.12.2011 will remain valid till the maturity of that instrument, irrespective of revision of interest rate with effect from 1.4.2012. As regards PPF, the interest rate fixed every year will be applicable to all PPF accounts.

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0 Comments

  1. Duke Sekhon says:

    PPF Scheme is very popular with the investors, especially senior citizens, since it provides everyone a study, secure and tax-free income on a fixed amount of annual investment over an extendible period of initial 15 years tenure. One doesn’t understand the compelling reason behind tinkering with this popular and desirable scheme now, which remained mostly undisturbed over the years? Perhaps, Tax Guru will take up this worthy issue with the Finance Ministry on behalf of a large number of Income Tax payees and make a request to the concerned authorities to let status quo prevail in the matter.

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