Are small savings schemes still worth it for taxpayers in 2025?

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For a long time, small savings schemes were the default choice for most taxpayers. They were safe, predictable and easy to understand. But the last couple of years have changed the landscape. Bond yields have been high, target maturity funds have become more popular, and interest rates in banks have climbed. This has made many investors pause and ask whether schemes like PPF, NSC or Sukanya still justify a long lock-in.

How PPF compares today

PPF continues to offer one thing most products don’t: tax-free returns. The rate hasn’t moved from 7.1% for many quarters, which makes it look low on paper. But the tax treatment changes the picture. For someone in the 30% slab, a 7.1% PPF return is roughly equal to a 9.8-10% taxable FD. That advantage is still hard to replace.

The issue is liquidity. Fifteen years is a long runway, and partial withdrawals don’t begin early. So PPF still works best for people who genuinely want to park money away for the long term and forget about it.

Why small savings rates feel slow in a rising-rate cycle

Small savings rates don’t usually mirror market rates immediately. They adjust slowly and often only on the way down. Over the past year, when banks raised FD rates aggressively, small savings schemes barely moved. That has made them look less attractive when compared to government bonds, T-bill funds or high-quality debt mutual funds.

Still, the certainty of a government guarantee is something many investors value when the rest of the portfolio is market-linked.

Who should continue these investments

Small savings schemes still make sense for investors who prefer stability over chasing every new cycle. PPF is still a strong anchor for long-term savings, especially for salaried taxpayers who want one predictable component in their mix.

SCSS and post-office monthly schemes continue to appeal to retirees who want steady income without credit risk. Sukanya Samriddhi remains unmatched for parents saving for daughters because of its higher rate and tax features.

Where these schemes fall short

The biggest drawback is the lack of flexibility. If you need liquidity, they don’t help much. If you want to adjust allocations quickly, they don’t move. And the returns look modest next to bond funds or even some corporate FDs.

For goals that are 10–20 years away, pairing PPF with equity funds or NPS often works better than putting everything into fixed-rate products.

The sensible middle path

Most investors do not need to pick one side. A mix usually works best. A portion in PPF for stability, some allocation to EPF or NPS, and the rest spread across market-linked debt and equity. This balance gives you growth without losing the safety net that government-backed schemes offer.

The bottom line

Yes, small savings schemes still have a place — but not as the entire plan. They work well as the low-risk foundation of your portfolio. Their job is not to outperform markets. Their job is to stay steady when everything else moves. And in 2025, that role still matters.

FAQs

Is PPF still better than an FD right now?

For people in higher tax brackets, yes. The post-tax return usually tilts in PPF’s favour, even though the headline rate looks lower. But if liquidity matters more than tax savings, FDs may work better.

Should I replace small savings schemes with debt funds?

Not entirely. Debt funds may offer higher returns at times, but they carry interest-rate risk. A mix of both is safer for long-term investors.

Is Sukanya Samriddhi still the best option for a girl child?

For most families, yes. The rate is higher than PPF, and the tax benefits are strong. The long lock-in is the only drawback.