PPF Row: Government cuts interest rate to 8.1% from 8.7%: Here is how it will impact you

The government on Friday has sharply reduced the interest rates on small saving schemes across the board. It will include Public Provident Fund, Senior citizen scheme, Kisan Vikas Patra, Sukanya Samriddhi Yojna , National saving certificate and Post office month income scheme.

The government has announced the highest reduction of 130 basis points in the case of one year deposit. Notably, the rates on small saving schemes have been reduced to align them to market rates.

Here is the chart of then and now:

• PPF: The government has cut rate to 8.1% to 8.7%. However, the interest earned on the PPF still remains tax – exempt on maturity
• KVP: The interest rate on KVP has been slashed to 7.8 percent from 8.7 percent. The tenure for investment have also been raised from 100 months to 110 months
• SSY: It has been cut down to 8.6 percent from 9.2 percent. However, the interest earned on it would tax- exempt on maturity
• SCSS: Interest earn on five – year senior citizen has been cut down to 8.6 percent from 9.3 percent and it would be taxable as well as TDS will also apply to it
• POMIS: For first year 8.4 to 7.1 , for 2 year 8.4 o 7.2, for 3 year 8.4 to 7.4
• NCS : It will have a rate cut from 8.50 to 8.10% and it would be tax- exempt

Since the government will now revise interest rates on such schemes every quarter they would be applicable from April 1 to June 30. With this cut in small saving schemes government has made it easier for RBI to cut the rates in coming bi- monthly monetary policy. And if RBI will cut rates in coming meet then it would benefit the common man as EMI’s of the loans will be cut accordingly.