Small savings schemes: PPF, SCSS, POMIS, NSC, KVP, SSY and post office deposits

What you will learn: how the government's small savings schemes work, what each pays for deposits made from 1 October to 31 December 2026, how much you can put in, what it costs to get money out early, how the interest is taxed and which scheme fits which job.

Suresh Kulkarni (an illustrative profile), 63, retired from a cooperative bank in Nashik and has about ₹60 lakh to place. His wife Lata turned 60 this year. Their daughter Neha, 34, a salaried engineer in Pune, wants somewhere safe for long-term money, and her daughter Anvi is four. At the post office counter they are handed a sheet with eleven schemes and eleven rates. Their real question: which of these suits each of us, what do we actually keep after tax, and what happens if we need the money back early?

What small savings schemes are

Small savings schemes are deposit and certificate schemes run by the central government under the Government Savings Promotion Act, 1873. You open them at a post office, and several of them also at authorised banks. The money is a liability of the government, so the main risk is not default but the terms: lock-ins, penalties for early exit, deposit caps and tax.

They are not bonds. You cannot sell an NSC or a Senior Citizens' Savings Scheme account on an exchange, and their value does not move with market interest rates. How bonds and debt funds behave is covered in how bonds work and ways to own bonds; this lesson is only about the government schemes.

The Department of Economic Affairs reviews the rates every quarter. Its office memorandum of 30 September 2026 kept the rates for October to December 2026 unchanged from the previous quarter, which in turn had been unchanged from April to June 2026. One distinction matters more than the headline rate: for SCSS, NSC, KVP, the Monthly Income Scheme and time deposits, the rate on the day you open applies for the whole term. PPF and Sukanya Samriddhi apply each quarter's notified rate to the whole balance, so a 7.1% PPF today is not a 7.1% promise for 15 years.

The schemes at a glance

Eligibility narrows some rows. SCSS is for people aged 60 or more; someone between 55 and 60 who has retired can open it within three months of receiving retirement benefits, and can then deposit no more than those benefits. Retired defence personnel can open it from 50. Sukanya Samriddhi can be opened only by a guardian for a girl under ten, one account per girl, normally for up to two girls in a family. PPF allows one account per person and no joint accounts, and the ₹1.5 lakh yearly limit includes what you deposit in an account you run for a minor. Under Department of Posts guidelines of 21 August 2024 on accounts opened outside the rules, a second PPF account in the same name is merged into the first only up to the yearly limit, with any excess returned without interest, and Sukanya Samriddhi accounts opened by grandparents had to be transferred to a parent or legal guardian.

Getting money out early

This is where most disappointment happens. Each scheme's own rules decide whether you can leave, and at what cost.

• SCSS: closing within the first year means the interest already paid is recovered from the deposit. Between one and two years, 1.5% of the deposit is deducted; after two years, 1%. If you extend the account and close it within a year of the extension, 1% is deducted.
• POMIS: no exit in the first year. From one to three years, 2% of the deposit is deducted; after three years, 1%.
• NSC and KVP: treat both as money you cannot reliably get back early. The scheme rules allow early closure on the holder's death, forfeiture by a pledgee or a court order. KVP's rules set encashment values from two and a half years; ask the post office before relying on that route.
• Time deposits: nothing before six months. Under the November 2023 amendment, one- to three-year deposits closed before a year earn only the savings rate, two- and three-year deposits closed after a year earn two percentage points less than the rate for the period completed, and a five-year deposit can be closed early only after four years, at the savings rate.
• RD: premature closure after three years, at the savings rate. A loan of up to half the deposits is available after twelve instalments.
• PPF: loans are available between the end of the first and the end of the fifth year after the year of opening. Partial withdrawals start after five years from the end of the year of opening, limited to half the lower of two past balances, once a year. Premature closure after five years is allowed only for a life-threatening illness, higher education or a change of residency, at 1% less interest for the current block.
• SSY: up to half the previous year-end balance can be withdrawn for the girl's education once she turns 18 or passes Class 10. The account can close early for her marriage after 18, or on compassionate grounds.

Tax: the rate you keep

Two separate questions decide the tax result: is the deposit deductible, and is the interest taxed? Deductions apply only if you opt out of the new regime; the regime choice itself is explained in old versus new regime.

The deduction is the one in Schedule XV of the Act, capped at ₹1.5 lakh a year for everything it covers together, including your EPF contribution and life insurance premiums. Payments from Sukanya Samriddhi and the provident-fund payments covering PPF are listed as exempt in Schedule II. Withholding and declarations on taxable interest are covered in interest, dividends and TDS.

Now compare post-tax yields. A taxable rate keeps (1 − your marginal rate). At 31.2% (30% plus cess), SCSS's 8.2% becomes about 5.64%, NSC's 7.7% about 5.30%, the five-year deposit's 7.71% effective yield about 5.31% and POMIS's 7.4% about 5.09%. PPF's 7.1% stays 7.1%. For someone whose income is fully covered by the rebate, no tax is payable, so SCSS at 8.2% beats PPF at 7.1%. The same sheet of rates ranks differently for Suresh and for Neha.

Worked example: the Kulkarnis' three jobs

Assumptions (illustrative): rates as in the table, accounts opened in November 2026, no change in their circumstances, tax shown separately.

Job 1: income for Suresh and Lata

Suresh puts ₹30 lakh in SCSS and Lata, now 60, puts ₹15 lakh in her own SCSS account. Their joint POMIS takes ₹15 lakh.

• Suresh's SCSS: ₹30 lakh × 8.2% = ₹2,46,000 a year, or ₹61,500 a quarter.
• Lata's SCSS: ₹15 lakh × 8.2% = ₹1,23,000 a year, or ₹30,750 a quarter.
• POMIS: ₹15 lakh × 7.4% = ₹1,11,000 a year, or ₹9,250 a month.
• Total: ₹4,80,000 a year, an average of ₹40,000 a month, all taxable at slab. The rate is set for five years, but nothing rises with prices.

The adverse case is needing the money back. If Suresh closes his SCSS after 18 months, ₹45,000 (1.5% of ₹30 lakh) is deducted; after two years, ₹30,000. Closing the POMIS within three years costs ₹30,000. Keeping a separate emergency reserve, as explained in emergency reserve vs sinking funds, is usually cheaper than breaking a scheme.

Job 2: Neha's long-term tax-free money

Neha files under the old regime and pays 30% at the margin. For her, PPF's tax-free 7.1% beats a taxable 8.2%. If she deposits ₹1.5 lakh by 5 April each year for 15 years and the rate stayed at 7.1% throughout, the account would reach about ₹40.68 lakh. That rate is an assumption, not a promise: PPF's rate can change every quarter.

Job 3: Anvi's Sukanya Samriddhi account

Neha opens SSY for Anvi and deposits ₹1.5 lakh at the start of each year for 15 years, ₹22.5 lakh in all. If 8.2% held for all 21 years, the account would reach about ₹71.82 lakh. If the rate averaged 7.2% instead, about ₹62.28 lakh, roughly ₹9.5 lakh less. Plan with a range, not the current rate. How SSY sits beside other options for a child is covered in your child's education.

Who each scheme tends to suit

• SCSS: retirees who want quarterly income at a rate fixed for five years, within the ₹30 lakh per-person cap.
• POMIS: monthly income for anyone, including those under 60, with a lower cap.
• PPF: long-term money for people in higher tax brackets who can accept a 15-year horizon and a rate that moves.
• SSY: parents of a young daughter saving for her education or marriage.
• NSC and five-year time deposits: fixed-rate five-year money; useful for old-regime filers who still have deduction room.
• KVP: a lump sum you are sure you will not need for nearly ten years and want doubled at a known date.
• RD and shorter time deposits: disciplined saving for a goal one to five years away, compared with bank options in FDs, RDs and sweep accounts.

None of these protects against inflation, and all are taxed or capped in ways that limit how much of a plan they can carry. For goals more than seven to ten years away, compare them with the growth assets described in asset classes.

Try this: choose a scheme in five steps

1. Write the job: monthly income, a fixed sum on a date, or long-term growth with tax benefits.
2. Check eligibility and caps: age for SCSS, the girl's age for SSY, the ₹9 lakh or ₹15 lakh POMIS limit.
3. Compute the post-tax yield at your own marginal rate, not your neighbour's.
4. Read the early-exit rule and ask: what is the most likely reason I would need this money before maturity?
5. Note whether the rate is fixed for the term or reset each quarter, and diarise the maturity and extension dates.

Common questions

Where to go next

• Bond tax and laddering: arrange deposits and bonds so each year's cash is ready.
• Turning a corpus into a monthly income: where fixed-rate schemes fit in a retirement plan.
• Further reading: small savings interest rates for October–December 2026 and senior citizen tax planning.