Post Office savings bank deposits likely to fetch 4pc interest

New Delhi, June 7 (PTI) A government committee in India
has suggested raising interest rates on Post Office savings
bank deposits to four per cent, a suggestion that could
benefit lakhs of small depositors.
The Committee on Small Savings also recommended linking
returns on other small savings schemes with interest rates on
government securities.
It has also suggested that Kisan Vikas Patra (KVP) be
withdrawn and annual investment limit for the popular Public
Provident Fund (PPF) be raised to Rs 1 lakh from Rs 70,000 at
present.
The committee recommended that interest rates for Post
Office savings deposits be raised to four per cent from 3.5
per cent at present, in line with the Reserve Bank's decision
to hike rates on savings bank deposits.
Under the new formula, suggested by the committee headed
by RBI Deputy Governor Shyamala Gopinath, small savings
schemes would provide better returns to investors.
Interest rate for one-year deposit scheme would go up to
6.8 per cent from 6.25 per cent, while returns for the PPF
would improve to 8.2 per cent from 8 per cent.
With regard to taxing returns on the small savings
schemes, the committee said the issue should be considered
by the government while firming up the Direct Taxes Code
(DTC), which seeks to replace the Income Tax Act, 1961.
Noting that the small savings schemes are agent-driven,
the committee suggested that the commission on them should be
gradually reduced from four per cent to one per cent.