NEW DELHI: Here's some good news for millions of investors who depend on small saving instruments like post office savings and the public provident fund.
A committee set up by the finance ministry has recommended that the annual PPF limit be enhanced from the present level of Rs 70,000 to Rs 1 lakh, besides a change in the interest rate structure . Unlike the present system where rates have not changed during the UPA regime, the panel headed by RBI deputy governor Shyamala Gopinath has suggested that the return on all small saving schemes, other than post office savings accounts, be linked to the rate paid on government securities.
I n a rising interest rate environment , investors would reap the benefit and not merely have to shell out higher equated monthly instalments (EMIs).
The committee, which submitted its report to finance minister Pranab Mukherjee , has recommended that the rate of interest be at least 25 basis points higher than the G-sec yield. For senior citizens the spread should be at least 100 basis points higher. If the proposal is accepted, based on the present interest rate, PPF would offer close to 8.5%, instead of 8%. For senior citizens, the returns would be 9.25%. In both cases, it would be tax free.