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Small savings schemes: Public Provident Fund vs National Savings Certificate

Small savings schemes: Public Provident Fund vs National Savings Certificate

Small savings schemes: Public Provident Fund vs National Savings Certificate
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By Suman Singh  Sept 24, 2018 5:36:08 PM IST (Updated)

Under this revision, the interest rates for Public Provident Fund (PPF) which gives decent returns coupled with income tax benefits and National Savings Certificate (NSC), a tax-saving investment options available under the Section 80C of the Income Tax Act, has been raised to 8 percent from the previous 7.6 percent.

The government recently raised the interest rates on small savings schemes for the December quarter, after keeping them unchanged for the first two quarters of the current fiscal year.

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The interest rates have been raised between 30 to 40 bps (basis points) for the period from October 1 to December 31. One basis point is a hundredth of a percentage point.
Changes to interest rates
The interest rates for Public Provident Fund (PPF), which gives decent returns coupled with income tax benefits, and National Savings Certificate (NSC), a tax-saving investment options available under the Section 80C of the Income Tax Act, has been raised to 8 percent from the previous 7.6 percent.
Deposit guidelines
An individual holding a PPF account can deposit a minimum of Rs 500 to a maximum of Rs 1,50,000 per annum either as a lump sum amount or in a maximum of 12 installments in a year. Any deposit more than the Rs 1,50,000 per annum will neither earn any interest nor is eligible for rebate under the IT Act. A PPF account matures in 15 years, but can be further extended to five years within one year of maturity. Partial withdrawal is allowed every year from the seventh financial year from the year of opening a PPF account.
National Savings Certificate accounts hold no such barrier in terms of depositing capital in a NSC account. Investments can be made with a minimum of Rs 100 and in multiples of Rs 100, with no cap on the maximum amount that is to be deposited. An individual can buy NSCs every month for five years and can make a reinvestment on maturity. On retirement, as the NSC matures, the individual receives monthly pension.
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