The government has relaxed the norms for various small savings schemes, including the Public Provident Fund (PPF) and Senior Citizen’s Savings Scheme. The Senior Citizen’s Savings Scheme now allows three months to open an account, up from the current one month. Additionally, changes have been made to the premature closure rules for Public Provident Fund (PPF) accounts too. 

These changes were notified by the Department of Economic Affairs, Ministry of Finance on November 7.   

The government currently offers nine small savings schemes, including the Public Provident Fund (PPF), Sukanya Samriddhi Yojana, Senior Citizen’s Savings Scheme (SCSS), Post Office Monthly Income Scheme (POMIS), National Savings Certificate (NSC), Kisan Vikas Patra (KVP), Post Office Time Deposit (POTD), Atal Pension Yojana (APY), and Pradhan Mantri Vaya Vandana Yojana (PMVVY). Each scheme comes with its own set of features, tenures, and interest rates.  

Here are changes made in small savings schemes:

Senior Citizen’s Savings Scheme (SCSS)

The Senior Citizen’s Savings Scheme (SCSS) is designed for individuals aged 60 years or employees above 55 years of age and below 60 years of age, offering a 5-year tenure. However, earlier it mandated that investment be made within one month of receipt of retirement benefits.

Under the latest change, the government has: 

• Provided three months to invest in SCCS for individuals aged above 55 but below 60. 
• The new rules also permit the spouse of a government employee to invest the financial assistance amount in the scheme.
• The scope of retirement benefits has been clearly defined. As per the notification, retirement benefit means any payment received by the individual due to retirement or superannuation. This includes provident fund dues, retirement or superannuation or death gratuity, commuted value of pension, leave encashment, savings element of group savings linked insurance scheme payable by the employer on retirement, retirement-cum-withdrawal benefit under Employees’ Pension Scheme (EPS) and ex gratia payments under a voluntary or special voluntary retirement scheme.
• Under the updated rules, a one per cent deduction of the deposit is applicable if the account is closed before completing one year of investment.
• Account holders can now extend the account for any number of blocks, with each block lasting three years. Previously, the extension was allowed only once.
• In the case of extending the SCSS account on maturity, the deposit will earn the interest rate applicable to the scheme on the date of maturity or on the date of the extended maturity.
• As per the notification, “The deposit made at the time of opening of account shall be paid on or after the expiry of five years or after the expiry of each block period of three years where the account was extended under paragraph 8 from the date of opening of account. Provided that after the closure of the existing account or accounts, new accounts or accounts may be opened again as required by the depositor subject to the maximum deposit limit.”

New PPF rule

Earlier, the premature closure of a Public Provident Fund Account incurred a penalty, with interest allowed at a rate 1 per cent lower than the rate credited to the account since its opening or extension. 

However, the latest change in the Public Provident Fund Scheme, 2019, paragraph 13 and the second proviso, substitutes the clause “or from the date of commencement of the current block period of five years.” 

This modification implies that interest on premature closure will now be allowed at a rate of 1 per cent less than the interest periodically credited to the account from the start of the current five-year block period.

Five-Year Time Deposit Account

According to the notification, if a withdrawal is made prematurely from the five-year Time Deposit Account after four years from the account’s opening date, the applicable interest rate would be that of the Post Office Savings Account. 

As of now, closing a five-year Time Deposit account four years from the deposit date would entail the application of the interest rate applicable to a three-year Time Deposit account for interest calculation.

For the quarter spanning October to December 2023, the interest rates on various small savings schemes are as follows: Public Provident Fund (PPF) at 7.1 per cent, Senior Citizen’s Savings Scheme (SCSS) at 8.2 per cent, Sukanya Samriddhi Yojana at 8.0 per cent, National Savings Certificate (NSC) at 7.7 per cent, Post Office Monthly Income Scheme at 7.4 per cent, Kisan Vikas Patra at 7.5 per cent, 1-Year Deposit at 6.9 per cent, 2-Year Deposit at 7.0 per cent, 3-Year Deposit at 7.0 per cent, 5-Year Deposit at 7.5 per cent, and 5-Year Recurring Deposit at 6.7 per cent.