The Central Directorate of National Savings (CDNS) has announced revised profit rates for Short Term Savings Certificates (STSCs), effective December 2024. These adjustments reflect the economic environment and aim to align returns with current inflationary trends.
Here, we provide a comprehensive overview of the changes, implications for investors, and the broader adjustments in National Savings schemes.
Introduced in 2012, Short Term Savings Certificates are a popular investment vehicle for individuals seeking short-duration financial growth. Available to both Pakistani nationals and Overseas Pakistanis, these certificates cater to diverse financial needs with maturity options of:
- Three months
- Six months
- One year
Investors can start with a minimum of Rs10,000, with no upper limit on investments. Additionally, these certificates can be pledged as security for loans or other financial arrangements.
Revised Profit Rates for Short Term Savings Certificates
Effective December 2024, the following changes have been made to the profit rates of STSCs:
| Maturity Period | New Profit Rate (%) | Yield on Rs100,000 Investment | Previous Profit Rate (%) | Previous Yield on Rs100,000 |
|---|---|---|---|---|
| 3 Months | 12.76 | Rs3,190 | 14.32 | Rs3,580 |
| 6 Months | 12.74 | Rs6,370 | 13.46 | Rs6,730 |
| 1 Year | 12.38 | Rs12,380 | 12.96 | Rs12,960 |
Key Implications for Investors
- Reduced Returns: The decline in profit rates means lower yields across all tenures.
- Short-term Planning Adjustments: Investors may need to re-evaluate short-term investment strategies in light of reduced profitability.
Tax Implications on Profits
Profit earned from STSCs remains subject to withholding tax, determined by the investor’s tax compliance status:
- Active Taxpayer List (ATL): 15% withholding tax applies.
- Non-Filers: A 30% withholding tax is levied, regardless of investment amount or date.
This tax structure underscores the importance of maintaining compliance with tax regulations to optimize investment returns.
Broader Adjustments in National Savings Schemes
In addition to changes in STSC profit rates, the federal government has implemented widespread revisions across other National Savings schemes:
Savings Account
- New Rate: 13.5% (down from 16%)
- Basis Points Decrease: 250
Regular Income Certificates
- New Rate: 12.1% (down by 10 basis points)
Defense Savings Certificates
- Adjustments have been made to align with revised economic conditions.
Islamic Savings Accounts
- New Rate: 10.44% (decreased by 72 basis points)
Sarwa Islamic Term Account
Profit rates have been similarly adjusted, reflecting current market trends.
The revised profit rates present an opportunity for investors to reassess their portfolios and explore alternatives within and outside National Savings schemes. Key considerations include:
- Diversification: Balancing investments between fixed-income securities, equities, and real estate to mitigate risks.
- Inflation-Hedged Assets: Exploring instruments like inflation-protected bonds or mutual funds.
- Tax Efficiency: Ensuring compliance with tax laws to minimize deductions and maximize net returns.
 by the Central Directorate of National Savings (CDNS). Discover detailed insights into revised returns, taxation, and other changes in National Savings schemes effective December 2024){kind=link}