How EPF interest rates compare with other small savings schemes

The EPF scheme is offering an 8.5% interest rate to its 6 crore subscribers for 2019-20 at a time when other government-backed small savings schemes are mostly paying in the range 5-7%.

Business Desk, ETV Bharat:For the past many years, the Employees’ Provident Fund (EPF) scheme has continued to remain one of the top investment avenues for small investors due to its comparatively higher returns and associated tax benefits.

The EPF scheme is a retirement benefits scheme in which salaried employees in India receive annual interest on funds deposited in the EPF accounts by both employers and employees themselves.

Even amid a low interest rate regime, the Employees’ Provident Fund Organisation (EPFO) is offering an 8.5% interest rate to its 6 crore subscribers for 2019-20. Though the rate is lower than the 8.65% offered in 2018-19 and 8.55% in 2017-18, it is much higher than the 5-7% rate mostly offered by other government-backed small savings schemes in India.

Let’s take a detailed look at how the returns from the EPF scheme compares to other savings schemes in the country. Notably, interest rates on small savings schemes are revised every quarter depending on the yield on government securities. The interest rates mentioned below are valid for the October-December 2020 quarter:

Public Provident Fund (PPF): PPF, one of the safest and most popular small savings schemes in the country, fetches 7.1% interest rate and the interest is compounded on a yearly basis. Contributions made towards the scheme as well as the interest that is generated from the contributions are tax exempt.

National Savings Certificate (NSC): The government-backed NSC currently fetches 6.8% interest rate paid annually to investors. The duration of the scheme is five years. Individuals can invest in the scheme through post offices.

Kisan Vikas Patra (KVP): KVP offers interest rate of 6.9% (compounded annually) with a maturity duration of 124 months and is offered by post offices in India. It offers no tax rebate on either contributions or interest earned.

Sukanya Samriddhi Yojana (SSY):The girl child savings scheme Sukanya Samriddhi Yojana Account fetches an interest rate of 7.6% (compounded annually). An account for the same can be opened at post offices or banks by a parent or legal guardian for a girl child. The account matures 21 years after opening or on marriage of the girl child after she reaches the age of 18.

Senior Citizens Savings Scheme (SCSS): SCSS was launched to help individuals who are 60 years and above. The duration of SCSS is five years and the rate of interest offered under the scheme is 7.4% paid quarterly.

Post Office Monthly Income Scheme: The five-year Post Office Monthly Income Scheme (MIS), where interest is paid out monthly, currently offers 6.6%.

Post office term deposits: Post office term deposits of 1-3 years offer interest rate of 5.5% paid quarterly, while five-year deposits fetch 6.7% on a quarterly basis. The 5-year recurring deposits offer an interest rate of 5.8% quarterly.