SCSS is one of the small savings schemes, which allows the depositor to invest up to Rs. 15 lakhs in an account. The rates on such accounts are notified by the Govt. every quarter. The currently notified interest rate for SCSS for the quarter ending 30 June 2021 is 7.4% per annum (Source – www.dea.gov.in). The interest is paid to the account holder every quarter. The investment in SCSS is eligible for tax deduction under Section 80C. However, the interest is taxable in the hands of the investor.

It is also emerging out of Small Savings Schemes offered by the Govt. of India. A PPF account can be opened for 15 years, further extendable for five years. The interest on the PPF account is credited annually on 31 March every year as per the interest rates notified by the Govt. The currently notified interest rate for PPF for the quarter ending 30 June 2021 is 7.1% per annum (Source – www.dea.gov.in). The interest earned on the PPF account is exempt from tax, enhancing the utility of the PPF account as a tax-saving investment option.

NSCs also feature in the bouquet of investment options under the Small Savings Schemes offered by the Govt. The post offices issue NSCs for five years. While the interest rates for NSCs may be reset by the Govt. every quarter, such interest rates are applicable for NSCs subscribed during the quarter. For the NSCs issued earlier, the interest rate remains fixed throughout the tenure and does not get impacted by the market interest rates. The interest is paid to the investor at the maturity of such NSCs. The currently notified interest rate for NSC for the quarter ending 30 June 2021 is 6.8% per annum (Source – www.dea.gov.in). While the interest on NSCs is taxable, the amount reinvested is also eligible for deduction under Section 80C, except during the last year when the NSC matures, and the amount is paid to the investor.

Such an account can be opened only in the name of a minor girl child. The interest on SSA is credited annually on 31 March as per the interest rates notified by the Govt. every quarter. The present notified interest rate on SSA is 7.6% per annum for the quarter ending 30 June 2021 (Source – www.dea.gov.in). To encourage the households to save for their girl child, Sukanya Samridhhi Accounts carry the highest interest rates amongst all the Small Savings Schemes offered by the Govt. Just like PPF Account, the interest income from SSA is exempt from tax for the account holder.

1.An investor can invest in a 5-year tax-saving fixed deposit with any of the scheduled commercial banks and avail of the tax benefit under Section 80C. To be eligible for the tax benefit, one must provide the PAN (Permanent Account Number) while opening the deposit. Such deposits cannot be prematurely withdrawn or pledged against any loan. The interest rates on such FDs may vary in different banks, as the banks are allowed discretion in fixing the interest rates as per their requirements. Additionally, the interest income on such FDs may be subject to Tax Deduction at Source (TDS) and, further, taxable in the investor's hands.

Note: The tax provisions mentioned in the article are for illustrative purposes only and may be subject to changes. The provisions are updated as per the Finance Act 2021.