Small Savings Schemes: Civil Services Mentor Magazine - May - 2016

Small Savings Schemes

Small savings schemes include PPF, Senior Citizens Savings Scheme, Post office deposit etc. They were initially created to mobilise saving by encouraging “small earners” to save. They offered abovemarket deposit rates in accessible locations like post offices for this purpose. Each of the small saving scheme is designed for different purpose. Some of them look to target specific target groups like girl child, working class, senior citizens etc. Though good for the targetted group, small savings schemes are presenting a problem to banks. Because small savings schemes offer high and fixed deposit rates (within year) and compete with banks, it is difficult for banks to reduce their own deposit rates and hence pass on policy rate cuts to consumers in form of lower lending rates.

Presently thirteen National Saving Schemes (NSS) viz Post Office Savings Accounts, Time Deposits (1 year, 2 year, 3 year and 5 years), Monthly Income Scheme, Post Office Recurring Deposit Scheme, National Savings Certificate (VIII Issue), Kisan Vikas Patra Scheme, Public Provident Fund Scheme, Sukanya Samriddhi Account Scheme and Senior Citizens Savings Schemes are under operation.

Various important small savings schemes details are given below:

Senior Citizen Savings Scheme

  • There shall be only one deposit in the account in multiple of INR.1000/- maximum not exceeding INR 15 lakh.
  • An individual of the Age of 60 years or more may open the account.
  • An individual of the age of 55 years or more but less than 60 years who has retired on superannuation or under VRS can also open account subject to the condition that the account is opened within one month of receipt of retirement benefits and amount should not exceed the amount of retirement benefits.
  • Maturity period is 5 years.

Sukanya Samriddhi yojana

  • Minimum INR. 1000/-and Maximum INR. 1,50,000/- in a financial year. Subsequent deposit in multiple of INR 100/- Deposits can be made in lump-sum No limit on number of deposits either in a month or in a Financial year
  • A legal Guardian/Natural Guardian can open account in the name of Girl Child.
  • A guardian can open only one account in the name of one girl child and maximum two accounts in the name of two different Girl children.
  • Account can be opened up to age of 10 years only from the date of birth. For initial operations of Scheme, one year grace has been given.
  • If minimum Rs 1000/- is not deposited in a financial year, account will become discontinued and can be revived with a penalty of Rs 50/- per year with minimum amount required for deposit for that year.
  • Partial withdrawal, maximum up to 50% of balance standing at the end of the preceding financial year can be taken after Account holder’s attaining age of 18 years.
  • Account can be closed after completion of 21 years.

Public Provident Fund

  • Minimum INR. 500/- Maximum INR. 1,50,000/- in a financial year.
  • Deposits can be made in lump-sum or in 12 installments.
  • An individual can open account with INR 100/- but has to deposit minimum of INR 500/- in a financial year and maximum INR 1,50,000/-
  • Maturity period is 15 years but the same can be extended within one year of maturity for further 5 years and so on.
  • Premature closure is not allowed before 15 years.
  • Deposits qualify for deduction from income under Sec. 80C of IT Act.
  • Interest is completely tax-free.

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