Small savings schemes have remained popular investment options for risk-averse investors, especially as they offer government backed safety, assured returns and competitive interest rates. While several of these schemes also help investors save tax on their contributions under Section 80C of the Income Tax Act, not all of them qualify for the deduction.
The government currently offers eight major small savings schemes, including PPF, NSC, SSY (for girl child), SCSS (for senior citizens), recurring deposit and KVP (Not just limited to farmers).
Which small savings schemes qualify for Section 80C deductions?
The following schemes are eligible for deduction:
Investments made in these schemes can be claimed as a deduction under Section 80C of the Income Tax Act, helping investors reduce their taxable income while earning government-backed returns.
Which schemes do not qualify for Section 80C deductions?
Not all small savings schemes are eligible for tax deductions under Section 80C. Investments made in the these schemes do not qualify for the benefit:
- Kisan Vikas Patra (KVP)
- The Post Office Monthly Income Scheme
- 1-year, 2-year and 3-year Post Office Time Deposits
- Post Office Recurring Deposit (RD)
While these schemes offer government-backed safety and attractive returns, the money invested in them cannot be claimed as a deduction under Section 80C.
Benefits available under Section 80C
Section 80C is a deduction against total income, allowing a taxpayer to reduce their taxable income up to a ₹1.5 lakh. This means the deduction is subtracted from your income before tax is calculated, not from the tax amount itself.
It offers tax savings against various government backed investments, saving schemes, and other payments such as home loan repayment.
The deduction limit applies to the cumulative investment amount, not amount contributed against each investment or payment. Irrespective of the amount of investments, the maximum limit is fixed at ₹1.5 lakh.
Taxpayers must also note that the benefit of Section 80C deduction is available only under the old regime. Taxpayers opting for the new tax regime are not eligible for this deduction.
Interest rate offered by small savings schemes
The government reviews the interest rates on small savings schemes each quarter. However, for the first quarter of FY 2026-27 (April 1 to June 30, 2026), it decided to leave the rates unchanged.
“The rates of interest on various Small Savings Schemes for the first quarter of FY 2026-27 starting from 1st April, 2026 and ending on 30th June, 2026 shall remain unchanged from those notified for the fourth quarter (1st January, 2026 to 31st March, 2026) of FY 2025-26,” the ministry said in a release earlier.
Here are the interest rates of several small savings schemes:
- Sukanya Samriddhi Yojana (SSY) — 8.2%
- Public Provident Fund (PPF) — 7.1%
- National Savings Certificate (NSC) — 7.7%
- Kisan Vikas Patra (KVP) —7.5%
- Senior Citizen Savings Scheme (SCSS) —8.2%
- Monthly Income Scheme (MIS) — 7.4%
- Post Office Savings Account — 4.0%
- 1-year Fixed Deposit —6.9%
- 2-year Fixed Deposit —7.0%
- 3-year Fixed Deposit —7.1%
- 5-year Fixed Deposit —7.5%
- 5-year Recurring Deposit (RD) — 6.7%
The last major revision in these rates occurred in the January-March quarter of FY 2023-24. During April 2024, the government implemented minor hikes for only the three-year time deposit and SSY. Since that period, the broader interest rate environment for these retail products has been held steady.
