GS Paper II

News Excerpt: 

The government raised the returns on the Sukanya Samriddhi Account Scheme (SSAS) and Post Office three-year time deposits scheme.

About the news:

• The Union government decided to raise the returns on the Sukanya Samriddhi Account Scheme (SSAS) from 8% to 8.2% and on three-year time deposits from 7% to 7.1% for the first quarter of 2024.
•   It retained the status quo on interest rates for all other small savings schemes.
• A small savings rate reset was keenly awaited as returns on these schemes had been hiked significantly ahead of the last Lok Sabha poll in 2019 as well.
• However, there was no major rejig this time around and returns on the popular Public Provident Fund (PPF), which had been hiked to 7.9% ahead of the previous Lok Sabha election, remain frozen at 7.1%.
• While this marks the sixth successive quarter of hikes in select small savings schemes, the PPF rate has been unchanged since April 2020.

What are Small Savings Schemes?

• Small savings schemes are investment avenues offered and managed by the government that allow individuals to save and accumulate wealth.
• The central government reviews the interest rates of small savings schemes every quarter based on the G-Secs yields of the previous three months. 
• This is in line with the recommendations of the Shyamala Gopinath Committee, 2011 to ensure that the interest rates of small savings schemes are market-linked.

Sukanya Samriddhi Yojana (SSY)

Ministry:

• Sukanya Samriddhi Yojana (SSY) is one of the National Savings Schemes offered by the Government of India under the aegis of the Ministry of Finance.

Objective:

• Notified in Decemeber 2014, it was launched in the year 2015 under the Government of India's '' Beti Bachao Beti Padhao'' campaign. The scheme is meant to meet the education and marriage expenses of the girl child.

Features:

• Account can be opened in the name of a girl child till she attains the age of 10 years.
•  Only one account can be opened in the name of a girl child.
• Withdrawal shall be allowed for the purpose of higher education of the Account holder to meet education expenses.
• The account can be prematurely closed in case of marriage of girl child after her attaining the age of 18 years.
•  The account can be transferred anywhere in India from one Post office/Bank to another.
• The account shall mature on completion of a period of 21 years from the date of opening of account.
• Deposit qualifies for deduction under Sec.80-C of I.T.Act. Interest earned in the account is free from Income Tax under Section -10 of I.T.Act.

Post Office Time Deposit 

•  Assured returns and flexibility: This post office scheme promises assured returns on the account holder’s investments. The time deposit accounts can be easily transferred from one post office to another. Time deposit accounts can be either solely operated or jointly held.
• Tenure: Deposits under post office time deposit schemes can have tenure of 1, 2, 3 or 5 years, and only one deposit can be made in one account.
• Maturity and renewal: Account holders can extend the duration of a time deposit account upon its maturity. If proceeds of a mature account are not withdrawn, the account will be automatically renewed for the original deposit tenure at applicable interest rates as on the date of maturity.
•  Account opening:  There is no cap on the number of time deposit accounts that can be opened. Minimum deposit required to invest in the Post Office Time Deposit scheme is Rs. 1,000.
•  Interest Rate determination: The Indian Finance Ministry reviews the interest rates on the scheme in the beginning of every quarter of the financial year. 

Time deposit

• A term deposit is also referred to as a time deposit, which is an investment instrument. 
• The account holder deposits a specific amount of money at an agreed interest rate for a fixed timeframe.
• A time deposit is available at financial institutes such as NBFCs, banks, post offices, building societies,etc.. 

Public Provident Fund Account

• About: It is a savings and investment scheme introduced by the National Savings Institute of the Ministry of Finance to encourage small savings & investment among citizens.
•  Deposit Limits: Minimum deposit ₹ 500/- & Maximum deposit ₹ 1,50,000/- in a financial year.
• Loan & withdrawal: Loan facility is available from 3rd financial year upto 6th financial year. Withdrawal is permissible every year from 7th financial year.
•  Maturity and Extension: Account matures on completion of fifteen complete financial years from the end of the year in which the account was opened. After maturity, the account can be extended for any number for a block of 5 years with further deposits.
•  Retention: Account can be retained indefinitely without further deposit after maturity with the prevailing rate of interest.
• Protection from Attachment: The amount in the PPF account is not subject to attachment under any order or decree of a court of law.
• Tax Deductions: Deposit qualifies for deduction under Sec.80-C of I.T.Act. Interest earned in the account is free from Income Tax under Section -10 of I.T.Act.