For nearly two years, or eight quarters, the interest rates on small savings schemes have remained unchanged. The new tax regime further compounded the problem, as it offered no tax relief for investments in small savings schemes. Everyone thought these schemes would now become irrelevant and eventually be discontinued.

However, that didn't happen. Even though the government removed the tax benefits on these schemes, how could it eliminate the investment and savings habits of ordinary people? Despite all this, the middle class of the country continued to trust small savings schemes like PPF, NSC, and Sukanya Samriddhi Yojana, investing more than ₹2 lakh crore. Let's tell you what kind of report has emerged.

Over ₹2 lakh crore invested

According to an ET report, citing sources familiar with the matter, the National Small Savings Fund (NSSF) collected ₹2.17 lakh crore by January 10th, which is approximately two-thirds of the current financial year's budget estimate (BE). Since a large portion of such deposits typically comes in the March quarter due to the year-end rush for tax-saving schemes, officials expect the total collection for 2025-26 to exceed the primary target.

The budget estimate was lowered.

The higher-than-budgeted investment in small savings schemes, including Public Provident Fund and Sukanya Samriddhi Yojana, has provided additional relief to the central government and reduced its need to borrow from the market. The Centre has budgeted ₹3.43 lakh crore from the NSSF for 2025-26 to meet a portion of the fiscal deficit, which is lower than the ₹4.12 lakh crore (revised estimate) for FY 2025. The goal is to limit the fiscal deficit to ₹15.69 lakh crore, or 4.4 percent of GDP, in 2025-26, down from 4.8 percent a year earlier.

No relief in the new tax regime

The reduction in the NSSF (National Savings Fund) allocation in the budget was made keeping in mind the likelihood of a large number of taxpayers shifting to the new tax regime. The previous budget had made this regime more attractive by increasing tax relief. The new system offers tax incentives on small savings schemes, while the old system allows tax deductions on deposits up to ₹1.5 lakh per year under Section 80C of the Income Tax Act.

75% in the new tax regime

Officials said that despite approximately 75 percent of taxpayers shifting to the new tax regime, small savings schemes are still receiving significant deposits. This is because the new interest rates are more attractive compared to some other similar investment options. The government has reduced its 2025-26 target for gross market borrowing through debt securities from ₹14.82 lakh crore, as projected in the budget, to ₹14.72 lakh crore.

No change in interest rates for two years

For the eighth consecutive quarter until March, the interest rates on a dozen small savings schemes have remained unchanged. This is despite the central bank cutting the benchmark lending rate by 125 basis points over the past year, putting pressure on bank deposit rates. Changes in interest rates on small savings schemes are usually determined by considering the expected returns on government securities of similar tenure, which have started to decline in recent quarters.

What are the current rates?

Deposits in PPF and Sukanya Samriddhi accounts are currently earning interest rates of 7.1% and 8.2%, respectively, in the current quarter. The interest rates remain unchanged for the Senior Citizens Savings Scheme (8.2%), National Savings Scheme (7.7%), Kisan Vikas Patra (7.5% on maturity in 115 months), Savings Account (4%), one-year Fixed Deposit (6.9%), two-year Fixed Deposit (7%), three-year Fixed Deposit (7.1%), five-year Fixed Deposit (7.5%), five-year Recurring Deposit (6.7%), and Monthly Income Savings Scheme (7.4%).

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