Public Provident Fund (PPF) is a very long term investment in small savings schemes with a maturity period of 15 years. Despite the huge lock-in period, investors still have a lot of confidence in this. However, it is now being discussed whether the maturity period of 15 years should be reduced and if its interest rates should be made equal to EPF.
State Bank of India (SBI) economists have given many suggestions to the government regarding small savings schemes. In a report by SBI Research, it has been said that the lock-in period of 15 years of PPF should be reduced. There are many more such suggestions, so let's understand one by one.
1. The 15-year lock-in period of PPF accounts should be reduced
A suggestion has been made regarding PPF that the government should reduce the lock-in period of 15 years. Also, investors should be allowed to withdraw their money within a stipulated period. For this, the option of reducing the incentive of investors can be discussed. Rs 1.5 lakh can be invested annually in PPF and it gets the protection of the government. Its main objective is to make retirement secure for the unorganized sector, people doing their own business.
2. PPF, EPF interest rates should be equal
SBI research has also suggested the central government to bring parity in the interest rates of Employee Provident Fund (EPF) and Public Provident Fund (PPF). It has been said in the report that the interest rates of EPF and PPF should be equal so that people are encouraged to save more and more. Although this demand has been made in the past as well.
3. Tax exemption on interest on Senior Citizen Savings Scheme
One suggestion is regarding tax exemption on the interest of the Senior Citizen Savings Scheme. The report states that the interest from the Senior Citizen Savings Scheme is fully taxable. SBI Ecowrap's report said that as of February 2020, the outstanding amount under these schemes was Rs 73,725 crore. If full tax exemption is given on this, then the government will not have much impact. Under the Senior Citizen Savings Scheme, senior citizens can deposit up to Rs 15 lakh, which earns an interest of 7.4% annually.
4. Interest Rates on Small Savings Schemes
On June 30, the government announced that the interest rates of small savings schemes will remain unchanged for the fifth time in a row. For the second quarter, there has been no change in the interest rates of schemes like the Public Provident Fund (PPF), National Savings Certificate (NSC) and Sukanya Samriddhi Scheme. According to the notification issued by the Finance Ministry on June 30, interest at the rate of 7.10 percent on PPF, 6.8% on NSC, 6.6% on the Post Office Monthly Income Scheme will continue to be available. Sukanya Samriddhi Scheme is currently getting 7.6% interest. Whereas the Senior Citizen Saving Scheme is getting 7.4% interest, which will continue to be available even further.
Scheme Interest Rate