Small Saving Scheme Rules: The government has changed the rules of small savings schemes. The government has taken this decision after quarterly review. Review happens every quarter.
Small Saving Scheme Rules: The government has recently made changes to its three small savings schemes – Senior Citizens Savings Scheme (SCSS), Public Provident Fund (PPF) and 5-year Post Office Fixed Deposit. Its objective is to provide better benefits and facilities to investors. Changes have been introduced in the rules for premature closure under the revised guidelines called the Public Provident Fund (Amendment) Scheme, 2023.
Earlier, closing a PPF account before its maturity attracted a penalty, as well as allowed interest at a rate 1% lower than the rate credited to the account since the inception or extension of the account.
However, the amendment states that interest on premature closure will now be calculated at a rate 1% lower than the interest credited from time to time in the account from the beginning of the current five-year block period.
This essentially means that the penalty for early closure will now be based on the interest earned during the current block period, offering a different calculation method to determine the lower interest rate applicable for early closure.
In another important step aimed at providing convenience to senior citizens, the updated norms now extend the period for opening accounts under the Senior Citizens Savings Scheme. Earlier it was scheduled for one month, but it has been increased to three months.
As per the notification, individuals can now start opening the account within three months from the date of receipt of retirement benefits, offering a more comfortable time frame with the requisite proof of disbursement dates for retirement benefits.
On the other hand, the Revised National Savings Time Deposit Scheme offers a changed interest structure for premature withdrawal from the five-year account. Earlier, if one made premature withdrawal after four years, the interest rate applicable was the same as for a three-year fixed deposit account.
However, with the revised scheme, if premature withdrawal occurs after four years of account opening, the interest rate applicable will now be in line with that of Post Office Savings Account, as stated in the official notification.
Meanwhile, small savings schemes are a popular investment vehicle where most Indians, especially senior citizens, still prefer to save.
It is noteworthy that the interest rates on small savings schemes are reviewed by the government every quarter. For the October-December 2023 quarter, the government kept small savings interest rates stable except for a marginal increase in five-year recurring deposit rates.