The government has recently implemented changes to three of its small savings schemes, namely the Senior Citizen’s Savings Scheme (SCSS), Public Provident Fund (PPF), and 5-year post office time deposit, with the aim of providing enhanced benefits and convenience to investors. The amendments, outlined in the Public Provident Fund (Amendment) Scheme, 2023, primarily focus on alterations to premature closure regulations.
Previously, closing a PPF account before maturity incurred a penalty, with interest allowed at a rate 1% lower than the rate credited to the account since its inception or extension. The revised guidelines now specify that the interest on premature closure will be calculated at a rate 1% less than the interest periodically credited to the account from the beginning of the ongoing five-year block period. This shift introduces a different calculation method for determining the reduced interest rate applicable upon early closure.
Additionally, in a move to assist senior citizens, the updated norms extend the duration to open an account under the Senior Citizen’s Savings Scheme. Previously set at one month, this period has been extended to a more accommodating three months. Individuals can now initiate the account opening within three months from the date of receiving retirement benefits, providing a relaxed timeframe along with the requirement of proof of disbursal dates for retirement benefits.
Furthermore, the revamped National Savings Time Deposit scheme introduces altered interest structures for premature withdrawals from a five-year account. Previously, if someone withdrew prematurely after four years, the interest rate applied was similar to that of a three-year Time Deposit account. With the revised scheme, a premature withdrawal after four years will now align the interest rate with that of the Post Office Savings Account, as indicated in the official notification.
Small savings schemes remain popular investment avenues, especially among senior citizens, and are subject to quarterly reviews of interest rates by the government. For the October-December 2023 quarter, the government maintained small savings interest rates steady, with a marginal increase observed in five-year recurring deposit rates.