New Delhi, Nov 12 (IANS): The government Friday hiked interest rates on deposits under the public provident fund (PPF) scheme to 8.6 percent from 8 percent and post office savings accounts to 4 percent from 3.5 percent - a move that will benefit millions of depositors.

The maximum deposit limit in a PPF account has been raised to Rs.1 lakh in a financial year from the earlier Rs.70,000. The minimum deposit limit under the popular scheme remains at Rs.500 per year.

The PPF scheme is a favourite investment option for salaried as well as self-employed individuals. The interest earned under the scheme is tax free. PPF deposits are also exempt from wealth tax.

The government has also decided to hike interest rates on post office savings deposits to 4 percent from 3.5 percent.

The hike in the interest rates on post office savings deposit is in line with the increase in interest rates on savings banks deposits. The Reserve Bank of India (RBI) recently directed commercial banks to hike rates on savings deposits.

The PPF scheme, a statutory scheme of the central government, is for a maturity period upto 15 years. The interest rates on one-year fixed deposits has been increased to 7.7 percent from 6.25 percent, the highest increase among different maturity period. Interest rates on other time maturities have also been hiked.

However, the government has decided to discontinue the Kisan Vikas Patras (KVPs) and lowered the maturity period for National Savings Scheme to five years from six years.

Here are the salient feature of the government decision:

* Interest rates on public provident fund scheme hiked to 8.6 percent from 8 percent

* Maximum deposit limit raised to Rs.1 lakh from Rs.70,000

* Rates on post office savings deposits raised to 4 percent from 3 percent

* Kisan Vikas Patras discontinued

* Maturity period of National Savings Scheme cut to 5 years from 6 years