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Explained: Middle class needs relief, will government increase PPF interest rates?

Sagar Patel

By Sagar Patel

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Will the government increase the interest rates of the Small Savings Plan for the July to September quarter?

The election has taken place. The NDA government has arrived. The deputies and ministers have taken the oath. Now the common people, or rather the middle class, are waiting for a big relief. That relief is the increase in interest rates on small savings plans. After the formation of the new government, the government now faces the big task of changing the interest rates of the small savings scheme between the July and September quarters. Investors in the Public Provident Fund, the most popular scheme of small savings plans, are awaiting the rise in interest rates. The last change in PPF interest rates was for the April-June quarter of 2020. Four years have passed since then and PPF interest rates remain at 7.1 percent.

During this period, the Central Government had increased the interest rates on small savings schemes by between 0.40 per cent and 1.50 per cent. Now the biggest question is whether the government will finally make the people who invest in FPP happy this time. The Central Government has announced the opening of Public Provident Fund (PPF), Senior Citizens Savings Scheme (SCSS), National Savings Certificate (NSC), Sukanya Samriddhi Yojana (SSY), Monthly Savings Scheme Post Office (POMIS) and other savings plans for July-December quarter interest rates can be announced before June 30, 2024. Let’s try to understand, quoting experts, how much the government can increase the interest rates of these plans for the next quarter.

How is the PPF interest rate calculated?

Small Savings Schemes: The interest rates of PPF, SCSS, SSY and other schemes are linked to the market yield of 10-year government securities in the secondary market. The central government reviews interest rates on small savings plans every quarter based on the average performance of government securities over the last three months. This is based on the recommendations of Shyamala Gopinath Committee, 2011. So that interest rates on small savings schemes can be ensured to be market-linked.

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What should be the PPF interest rate?

According to the formula notified by the Ministry of Finance in 2016, the PPF has a variation of 0.25 per cent over the benchmark yield. According to data from, the yield on the benchmark 10-year bond averaged 7.02 percent from March to May 2024. According to the formula, the PPF interest rate will be 0.25 basis points higher than the yield G-Sec average 10 years from the respective maturity. Therefore, strictly following this process, the PPF rate should be set at 7.27 percent from July 2024.

Will the government increase the PPF interest rate?

Many experts believe that although there is scope for a slight increase in the PPF interest rate during the next quarter, the government can maintain the status quo. Abhishek Kumar, SEBI registered investment advisor and founder of, says in the media report that inflation is under control and the 10-year G-Sec yield is around 7 per cent, we don’t think PPF interest increases. during the review cycle, and the status quo on interest rates is expected to be maintained.

Historically, the government has not consistently followed the formula recommended by the Shyamala Gopinath Committee for fixing interest rates on PPFs or other small savings schemes. There are instances where the formula prescribed by the Gopinath Committee indicated a low interest rate, but the government chose to give a high rate to the PPF. Therefore, based solely on the formula suggesting an increase, the PPF interest rate may not necessarily be increased in the July-September quarter of 2024.

Why hasn’t the PPF interest rate increased in the last four years?

The exemption-exemption-exemption or EEE status of PPF seems to be the reason why there has been no change in its interest rates for the last 4 years. PPF is one of the few small savings plans that provides various exemptions. Investment in PPFA entitles investors to a tax exemption of up to Rs 1.5 lakh under section 80C of the Income Tax Act, 1961. Investors earn interest from a PPF account which is tax-free.

Apart from this, there is no tax on the income upon maturity of the PPF account. Therefore, if we look at the tax-free return, PPF offers the best returns among small savings plans. According to some experts, despite getting exempt status, the Central government has increased the interest rate of Sukanya Samriddhi Yojana to 8 per cent. While the AUM of PPA is higher than that of SSY.

Will SCSS, NSC and Sukanya Samriddhi interest rates increase?

Will the government change the interest rates of other small savings schemes like PPF, SCSS, NSC and SSY? In response to this, experts say that the possibility of any change in interest rates on small savings plans is negligible. In the budget to be published in July it will be clear when interest rates on small savings plans can be increased. After the budget, there may be some chances of interest rate hike in the third quarter of the financial year.

Sagar Patel

Sagar Patel

I am Sagar Patel, specializing in business news reporting. With a keen focus on economic trends, market analysis, and corporate developments,

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