Changes in small saving wef from 1 dec11

 

The finance ministry has approved the Thirteenth Finance Commission recommendations to make NSSF more flexible and market linked so that investor earns better returns. Also, the ministry has made some major restructuring in the commissions paid to the agents. It will be effective following the issue of the notification from the government.

According to the decisions on the recommendations of the committee for comprehensive review of NSSF, payment of commission on Public Provident Fund (PPF) schemes (1%) and Senior Citizens Savings Scheme (0.5%) will be discontinued whereas agency commission under all other schemes will be reduced to 0.5% from existing 1%. However, commission at existing rate of 4% will continue for Mahila Pradhan Kshetriya Bachat Yojana agents. Also the incentives, if any, paid by the state/UT governments will be reduced from the commission paid by the central government.

Furthermore, the annual ceiling on investment under PPF will be increased from Rs. 70, 000 to Rs. 1 lakh and the interest on loans obtained from PPF will be increased to 2% p.a. from existing 1% p.a. while Kisan Vikas Patras will be discontinued. Liquidity on post office time deposits will be improved allowing pre-mature withdrawal at a rate of interest 1% less than the time deposits of comparable maturity. Pre-mature withdrawals between 6-12 months of investment, will be paid at the rate of interest applicable on post office savings account.

Following are the rate of interest on various small savings schemes for current financial year on the basis of the interest compounding/ payment built in the schemes, assuming the date of implementation as 1 December, 2011:

Instrument	Current Rate (%)	Proposed Rate (%)
Savings Deposit	3.5	4
1 Year Time Deposit	6.25	7.7
2 Year Time Deposit	6.5	7.8
3 Year Time Deposit	7.25	8
5 Year Time Deposit	7.5	8.3
5 Year Recurring Deposit	7.5	8
5-Year SCSS	9	9
5 Year MIS	8.00 (6 year MIS)	8.2
5 Year NSC	8.00 (6 year NSC)	8.4
10 Year NSC	New Instrument	8.7
PPF	8	8.6
Payment of 5% bonus on maturity of MIS will be discontinued.