New Delhi: Deposit interest rates have been going higher since the RBI’s Monetary Policy Committee (MPC) hiked the repo rate to 4.90 percent in June, but they remain below the inflation range. Since the increase in the repo rate, interest rates on short-term deposits have risen, making it difficult for long-term investors to benefit from the rising trend in interest rates.
Despite rising repo rate, bank fixed deposit interest rates remained lower than post office plans in 2022. It is found out that fixed deposit interest rates offered by top banks such as SBI, ICICI, HDFC, Axis Bank, PNB, BoB, and others are significantly lower than interest rates on post office schemes such as Senior Citizen Savings Scheme (SCSS), Public Provident Fund Account (PPF), and Sukanya Samriddhi Account.
As a result, during this period of rising interest rates, individuals wanting more secure returns than fixed deposits might examine the following post office savings programmes for long-term investments. Read More:
Senior Citizens Savings Scheme
Senior Citizen Savings Scheme (SCSS) is a small savings scheme that is a popular investment option among senior persons who want to earn higher returns than fixed deposits. Adults over 60, retired civil employees over 55 but under 60, and retired military people over 50 but under 60 can open a SCSS account.
A senior citizen can open an account either separately or jointly with his spouse by depositing a minimum of INR 1000 and a maximum of INR 15 lakh. Senior citizens can also receive tax benefits of up to 1.5 lakh under Section 80C on SCSS investments, while the Senior Citizen Savings Scheme now offers a 7.4 percent annual return payable quarterly. The SCSS has a 5-year maturity period, however premature withdrawals are permissible with a penalty at any point following the date of opening.
Public Provident Fund Account
PPF is one of the most popular investment options for long-term investors due to its exempt-exempt-exempt (EEE) status. A single adult resident Indian or a guardian on behalf of a minor/person of unsound mind can open a PPF account with a minimum deposit of Rs. 500 and a maximum yearly commitment of Rs. 1.5 lakh. Deposits are eligible for section 80C of the Income Tax Act deductions, which investors should be aware of. PPFs have a 15-year maturity duration, and investors can currently earn 7.1% annual compounded interest on deposits.
Furthermore, interest earned is totally tax-free under the Income Tax Act. Except for the year of account activation and depositors with maturity desire, a subscriber can withdraw up to 50% of the amount once each financial period after five years. One can choose to keep the maturity value in the account without making a deposit, or receive the tax-free maturity amount when the PPF account matures. A PPF account can be withdrawn prematurely for emergencies only after five years have passed since it was established.
Sukanya Samriddhi Scheme
This post office scheme is designed for parents who want to save money for their daughter’s future. The term implies that guardians can open SSA accounts on behalf of their girl children under the age of ten, and that only one account can be opened in India under a girl’s name for up to two daughters in a family. An SSA account can be opened with a minimum deposit of Rs 250 and a maximum deposit of Rs 1,50,000, and deposits can be made for a maximum of 15 years after the account is opened. Sukanya Samriddhi Account deposits are tax deductible up to Rs. 1.5 lakh per year under Section 80C.
The Sukanya Samriddhi Account now has an annual interest rate of 7.6 percent, is compounded annually, and is eligible for income tax deductions under Section 80C of the Income Tax Act. The guardian will handle the account until the daughter reaches the age of 18, and a girl child can cancel the account and get maturity rewards after 21 years.
Alternatively, the SSA account for maturity funds may be closed when a female child marries after reaching the age of 18, i.e., one month before or three months after the day of marriage. Withdrawals from the account are permitted if a girl child reaches the age of 18 or has passed the tenth grade, and SSA accounts may be prematurely terminated after five years after account setup in case of circumstances.