In a move that will benefit millions of depositors, the government on Friday hiked interest rates on deposits under the Public Provident Fund (PPF) scheme to 8.6 percent from 8 percent and post office savings accounts to 4 percent from 3.5 percent.
The PPF scheme is a favourite investment option for salaried as well as self-employed individuals. The interest earned under the scheme is tax free. PPF deposits are also exempt from wealth tax.
The maximum deposit limit in a PPF account has also been raised toRs.1 lakh in a financial year from the earlier Rs.70,000. The minimum deposit limit under the popular scheme remains at Rs.500 per year.
The government has also decided to hike interest rates on post office savings deposits to 4 percent from 3.5 percent.
The hike in the interest rates on post office savings deposit is in line with the increase in interest rates on savings banks deposits. The Reserve Bank of India (RBI) recently directed commercial banks to hike rates on savings deposits.
However, the government has decided to discontinue the Kisan Vikas Patras (KVPs) and lowered the maturity period for National Savings Scheme to five years from six years.