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PPF, National Savings Certificate, Kisan Vikas Patra: Meaning and current rate of interest

Provident Fund, National Savings Certificate and Kisan Vikas Patra are some products launched by the different offices of the government of India. These products are launched to increase the habit of saving in the general public. Recently central government has reduced the rate of interest on the Public Provident Fund, National Savings Certificate, Kisan Vikas Patra and other saving schemes by 10 percent. In this article we have mentioned the new rate of interest on these products.  
Jul 1, 2019 19:11 IST
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Kisan Vikas Patra
Kisan Vikas Patra

The central government has reduced the rate of interest on some small savings schemes. In the wake of this new announcement we have covered the meaning of these some saving schemes and impact of this new development on the saving habits of the general public. 

What is a Public Provident Fund?

PPF or Public Provident Fund is a government supported savings scheme. It is open to everyone – unemployed, employed, self employed or even retired. It is not mandatory and anyone can contribute any amount to the PPF subject to a minimum of Rs 500 and maximum of Rs 1.5 lakh per year. 

It has a fixed return which is set by the government every quarter. You can open a PPF account with the post office or most major banks. The PPF interest rate is reviewed every quarter. The current PPF interest rate is 8%.

Recently the government has reduced the rate of interest on PPF by 10%. So new PPF rate of 7.90% for July- September 2019 quarter.

PPF is different from EPF.EPF is mandatory in nature while PPF is optional. PF is the popular name for EPF or Employees’ Provident Fund.

The National Savings Certificate (NSC) Meaning:

The National Savings Certificate (NSC) is a fixed income investment scheme. This NSC initiative is launched to promote small saving habits in the general public. This is a lesser risk oriented product which offers a fix interest which is currently at 8% per annum. 

NSCs are available in 2 fixed maturity periods – 5 years and 10 years. There is no maximum limit on the purchase of NSCs, but only investments of up to Rs 1.5 lakh can entitle you a tax exemption under Section 80C of the Income Tax Act, 1961.

Kisan Vikas Patra (KVP):

Kisan Vikas Patra (KVP) as a small saving certificate scheme started by the India post in 1988.The prime objective of KVP is to encourage long-term financial discipline in general people. The minimum investment in KVP is Rs. 1000 and there is no upper limit.

The amounted invested in the KVP get double in 118 months (9 years & 10 months). Many people invests in these small saving schemes so that they can get tax exemption in the income tax that is why these schemes are popular among salaried people.

Another benefit is that one does not have to pay any tax even on withdrawal from PPF after maturity.

Interest rates which are applicable to select small savings schemes have been revised with effect from from July 1, 2019. So from the July 1, 2019; the beholders of these schemes like (the Kisan Vikas Patra (KVP), 15-year Public Provident Fund (PPF), the National Savings Certificate (NSC) will receive 10% lesser interest for the quarter ending September 30.

 

Now lets have a look on the revised rate of return on these schemes;

Small Savings Scheme 

Interest Rate (April- June 2019

Interest Rate (July- September 2019

Savings Account 

4% 

4% 

Five-year recurring deposit (RD) account 

7.30% 

7.20% 

One-year time deposit (fixed deposit) account 

7% 

6.90% 

Two-year time deposit (fixed deposit) account 

7% 

6.90% 

Three-year time deposit (fixed deposit) account 

7% 

6.90% 

Five-year time deposit (fixed deposit) account 

7.80% 

7.70% 

Monthly Income Scheme 

7.70% 

7.60% 

Senior Citizen Savings Scheme (SCSS) 

8.70% 

8.60% 

15-year Public Provident Fund (PPF) 

8% 

7.90% 

National savings certificate (NSC) 

8% 

7.90% 

Kisan Vikas Patra (KVP) 

7.70% 

7.60% 

Sukanya Samriddhi 

8.50% 

8.40% 

(Source: indiapost.gov.in) 

Impact of reduction in the rate of interest can be;

The reduction in the annual rate of return will discourage the people to invest in these small saving schemes. So it may reduce the availability of fund for investment in the economy which may further reduce the overall development of the country.

Hence in the concluding i would like say that government should act wisely(reduction will not save huge government money) while taking the decisions related to the poor and middle sections of the Indian economy. 

 

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