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While in the last 5 years, most Government Small Savings Schemes paid interest 8.5 – 8.7%, ICICI Prudential Long Term Plan gave more than 11% compounded annual returns. ICICI Prudential Long Term Plan is the best performing income fund in the last 5 years (please see Top Performing Income Funds in our MF Research Section). Income funds invest in a variety of fixed income securities such as bonds, debentures and government securities, across different maturity profiles. When interest rates decline bond prices increase and income funds which invest in long maturity bonds are great fixed income investment options for investors in a declining interest rate regime. On the other hand, when interest rates are lower, long maturity bond investors get higher returns from the capital appreciation of bonds. When interest rates and Government bond yields go down, the interest rates of the small savings schemes also go down on a quarterly basis. Since Government small savings schemes and bank fixed deposits are preferred investment choices for a large number of Indian households, reduction in interest rates will have an adverse impact on the income of these investors. Major Banks have already reduced their Fixed Deposit interest rates to around 7.5%. In the current interest rate regime, it is expected that the interest paid by these schemes will go down even further. Under the new rules, the interest rates will be revised every quarter, based on the previous 3 month yields of the benchmark Government Bonds. The interest rates of all the government small savings schemes have been revised downwards by 0.6 to 0.75%. Under the new rules, investors in small savings schemes like Public Provident Fund, National Savings Certificates, Senior Citizens Savings Scheme, Post Office Monthly Income Scheme, Kisan Vikas Patra etc will earn considerably lower income than before. In the month of February 2016, the Government announced new small savings scheme rules, which has come into effect from April 1, 2016.