The new small savings scheme for women – Mahila Samman Savings Certificate– that was announced in the Union Budget 2023-24 may not offer any tax benefits, like some other schemes do. According to sources, the new scheme will offer a guaranteed rate of interest but will be taxed on the lines of fixed deposits. Hence, the interest income will be taxable.
Other small savings schemes such as the Public Provident Fund, Sukanya Samriddhi account and five-year post office deposits and national savings certificates offer tax benefits, with the former two under the exempt-exempt-exempt regime, where deposit, interest income and withdrawal are all exempt from income tax.
The government is however, banking on the high interest rate to make the new scheme attractive to subscrbers.
“This is in line with the overall thinking of the government to have an exemption less tax regime. The guaranteed returns of 7.5% for the new scheme for women over a two year period will be much higher than what is offered by fixed deposits by banks,” said an official source, adding that the exact contours of the scheme are still to be finalised. The scheme is expected to start by April 1.
Finance minister Nirmala Sitharaman had in the Union Budget proposed the one-time new small savings scheme for women to commemorate the Azadi ka Amrit Mahotsav. The scheme will be made available for a two-year period up to March 2025 and will offer deposit facility upto Rs 2 lakh in the name of women or girls for a tenor of two years at a fixed interest rate of 7.5 per cent with partial withdrawal option.
The Finance Bill, 2023 and the explanatory memorandum also do not provide any amendments to the income tax regime aimed at the new scheme.
The Budget has also increased the deposit limit for senior citizens for two small savings schemes. The maximum deposit limit for Senior Citizen Savings Scheme will be doubled to Rs 30 lakh while that for the Monthly Income Account Scheme will be doubled to Rs 9 lakh for single account and hiked to Rs 15 lakh for joint account.
With small borrowers, especially senior citizens facing the brunt of lower interest on fixed deposits for the last two years, the government expects keen interest in all three schemes.
The Union Budget has pegged the net accretion to small savings, including PPF, savings deposits and certificates, to increase by 7.4% to Rs 4.71 trillion in FY24. Net accretion to small savings is projected to decline by 20.4% to Rs 4.4 trillion in the revised estimates of FY23 from Rs 5.5 trillion in FY22.