Given that a large part of such deposits typically flows in the March quarter, driven by the year-end rush for tax-saving instruments, officials expect the overall 2025-26 collections to exceed the initial target.
Higher-than-budgeted inflows into small savings schemes-including the tax-saving Public Provident Fund and Sukanya Samriddhi Yojana-provide an additional layer of comfort to the central government and pare its market borrowing requirements.
Provides Centre added comfort on the market borrowing requirements
The Centre has budgeted its 2025-26 offtake from NSSF at ₹3.43 lakh crore, down from ₹4.12 lakh crore (revised estimate) FY25 to fund a part of the fiscal deficit. It aims to rein in its fiscal deficit at ₹15.69 lakh crore, or 4.4% of gross domestic product, in 2025-26 from 4.8% a year earlier.
The budgeted reduction in NSSF offtake was done, factoring in the likely shift of a large number of taxpayers to the new income tax regime, which was made more attractive in the last budget through larger tax relief.
The new regime does not offer tax incentives for small savings investments, while such deposits of up to ₹1.5 lakh a year continue to qualify for tax deduction under Section 80C of the Income Tax Act under the old regime.
Still, small savings schemes continue to draw healthy deposits, despite the migration of about 75% taxpayers to the new tax regime, officials said, attributing it to more attractive interest rates vis-a-vis some of comparable instruments. The government has already lowered its 2025-26 target of gross market borrowing through dated securities to ₹14.72 lakh crore from the budgeted ₹14.82 lakh crore.
Interest rates for a dozen small savings schemes are kept unchanged for an eighth straight quarter through March. This is despite the central bank trimming the benchmark lending rate by 125 basis points over the past one year, which has weighed down on bank deposit rates.
The rate changes for small savings schemes are usually determined, factoring in expected yields of government securities of comparable tenures, which, too, have started moderating in recent quarters.
Deposits under the PPF and Sukanya Samriddhi accounts continue to offer interests of 7.1% and 8.2%, respectively, in the current quarter.
The rates also remain unchanged for Senior Citizen Savings Scheme (8.2%), National Savings Certificate (7.7%), Kisan Vikas Patra (7.5% for maturity in 115 months), savings deposits (4%), one-year deposits (6.9%), two-year deposits (7%), three-year deposits (7.1%), five-year deposits (7.5%), five-year recurring deposits (6.7%) and the monthly income account scheme (7.4%).