Many small savings schemes are operated under the Post Office, under which the rules keep changing. Now another new change has come to the fore. A decision has been taken to stop paying interest under the deposit amount in a scheme.
Actually, the central government had issued a directive regarding the National Savings Scheme (NSS) earlier this year. In this, depositors were asked to withdraw their money by 30 September. It was also informed that interest payment will stop from October 1, 2024. That is, people will no longer get interest under the NSS scheme.
According to the guidelines issued by the government, depositors who had invested in the National Savings Scheme (NSS) more than 37 years ago with the intention of securing their financial future and future generations have been advised to withdraw
their entire amount by September 30, 2024. Because the payment of interest on their deposited funds will be stopped. Customers have also been asked to update KYC information.
NSS scheme is different from NSC
Investors should not get confused with the small savings scheme National Savings Certificate (NSC). National Savings Scheme (NSS) is a completely different scheme, which was closed for new investment in 1992, so that no one could invest under this scheme after 1992. However, the government was giving compound interest under this scheme and now this interest has also been stopped from 1 October 2024. For the period from March 2003 to 30 September 2024, the NSS interest rate was 7.5% per annum. Let us tell you that no change has been made in NSC. In such a situation, people investing here do not need to panic.
When was the scheme started?
The National Savings Scheme (NSS) was started in 1987 and continued till 1992, after which it was temporarily reopened the same year. However, it was finally closed in 2002. Despite its closure, the government continued to pay interest on existing deposits. During the scheme, many depositors chose to withdraw their investments, close their accounts and declare the amount as part of their taxable income. At the same time, some investors chose to keep their funds in active accounts, which are still running today.
Under the NSS, depositors had the opportunity to invest up to ₹40,000 annually, with the amount invested being eligible for tax deduction under Section 80C of the Income Tax Act, 1961. After a lock-in period of four years, depositors were allowed to withdraw both their principal deposit amount and the interest earned. Earlier, the scheme offered 11 per cent interest, which was later reduced to 7.5 per cent per annum.
Accounts before October 2024
If you have contributed to your NSS account before October 1, 2024, you will get interest at the rate of 7.5% per annum till the end of September 2024.
Accounts after October 2024
No interest will be paid for any new deposits or accounts opened after October 1, 2024. This information may influence your decision as to whether you should continue investing in NSS or explore other savings and investment options.
Tax rules
As per official rules, funds withdrawn from the NSS are subject to tax in the year they are withdrawn. However, if the depositor does not wish to withdraw the funds, the interest earned will remain tax-free as long as it remains in the account. If the depositor dies and his heirs withdraw the funds, the entire amount will be considered tax-free.
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