It was over 6 years back that Budget 2005 replaced Sec. 88 with Sec 80C. The New Sec.80C (as we all know) offers a deduction upto Rs. 1 Lakh. Interest rates would no longer be fixed for the Duration of the instrument but instead will be market linked. The means that rate will change (as pr the prevailing economic scenario) over the life of the instrument.
Highlights of Interest Rates on Small Savings Instruments:
- The rate of interest paid under Post Office Savings Account (POSA) will be increased from 3.5% to 4% p.a.
- 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.
- Assuming the date of implementation of the recommendations of the Committee as 1st December, 2011, the rate of interest on various small savings schemes for current financial year on the basis of the interest compounding/payment built in the schemes, will be as given below:
| Instrument | Current Rate (%) | Proposed Rates (%) |
| Savings Deposit | 3.50 | 4.00 |
| 1 year Time Deposit | 6.25 | 7.70 |
| 2 year Time Deposit | 6.50 | 7.80 |
| 3 year Time Deposit | 7.25 | 8.00 |
| 5 year Time Deposit | 7.50 | 8.30 |
| 5 year Recurring Deposit | 7.50 | 8.00 |
| 5-year SCSS | 9.00 | 9.00 |
| 5 year MIS | 8.00 (6 year MIS) | 8.20 |
| 5 year NSC | 8.00 (6 year NSC) | 8.40 |
| 10 year NSC | New Instrument | 8.70 |
| PPF | 8.00 | 8.60 |
See Finance Ministry Notification Click Here
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