Mahila Samman Savings Certificate: Interest rates, eligibility, and tax benefits explained

The Mahila Samman Savings Certificate (MSSC) is a unique small-savings scheme launched by the Department of Economic Affairs, Ministry of Finance to provide financial security and encourage savings among girls and women in India. 

Announced in the Union Budget 2023-24, this scheme is aimed at creating a safe and lucrative investment avenue for women, fostering a culture of long-term savings and financial independence.

Operational since April 1, 2023, the scheme is available through Post Offices and select Public Sector Banks and eligible Private Sector Banks. The scheme has a validity period up to March 31, 2025 making sure that ample opportunity for individuals to participate in this financial initiative.

Key features

1. Exclusive for girls and women: The scheme is tailored specifically for women, empowering them to build financial security and independence.
2. Limited-time offer: Accounts under MSSC can only be opened on or before March 31, 2025, with a fixed tenure of two years.
3. Attractive interest rate: MSSC offers an interest rate of 7.5% per annum, compounded quarterly, making it one of the most rewarding small-savings schemes.
4. Minimum and maximum deposits: The scheme allows deposits ranging from ₹1,000 to ₹2 lakh per account, making it accessible for women from different economic backgrounds.
5. Premature withdrawal facility: An option to withdraw a partial amount (up to 40% of the deposit) is available after the completion of one year, ensuring liquidity for unforeseen needs.
6. Availability across multiple platforms: Initially available through Post Offices, the scheme is now accessible via PSBs and eligible Private Sector Banks as per the June 27, 2023 notification.

Eligibility criteria

1. Who can open an account? Any girl or woman can open an account under this scheme. Parents or guardians can also open accounts on behalf of minor girls.
2. Age restrictions: While there are no explicit age restrictions for opening an account, the scheme primarily targets girls and women to encourage early savings.
3. Where to open the account? Accounts can be opened at Post Offices or any Scheduled Banks that are authorised to operationalise this scheme.

Benefits

1. MSSC empowers women by encouraging disciplined savings and creating a secure financial foundation.
2. The interest rate of 7.5% per annum makes it an attractive investment option compared to traditional savings accounts.
3. The scheme is backed by the Government of India, the scheme offers guaranteed returns, eliminating investment risks.
4. With the recent expansion to banks, the scheme is more accessible, even in rural and semi-urban areas.
5. The partial withdrawal option offers flexibility for emergency financial requirements.

Tax benefits

The scheme offers a secure and attractive investment option for women, with notable benefits regarding tax treatment and deductions. Here’s an in-depth look at the tax-related aspects of this scheme:

1. Tax Deducted at Source applicability

• No immediate TDS on interest: The interest earned under the MSSC scheme is not subject to TDS (Tax Deducted at Source) unless it crosses the threshold prescribed under Section 194A of the Income Tax Act.
• Threshold for TDS deduction: TDS will apply only if the interest earned in a financial year from post office savings schemes exceeds:

₹40,000 for general account holders, or

₹50,000 in the case of senior citizens.

• MSSC and TDS implications: For a maximum deposit of ₹2 lakh, the interest earned under MSSC over its two-year tenure does not exceed ₹40,000. Hence, TDS is not deducted from the interest received.

2. Taxability of interest income

While TDS is not deducted, the interest earned under the MSSC is taxable as per the individual’s income tax slab. Beneficiaries must declare this income while filing their Income Tax Returns.

3. Tax exemptions

The deposits made under the Mahila Samman Savings Certificate Scheme do not qualify for tax deductions under Section 80C or other provisions of the Income Tax Act. Therefore, there is no upfront tax-saving benefit for the investment amount.

Premature closure

Although MSSC is designed for a fixed tenure of two years, premature closure is permitted in the following situations:

1. Closure after six months without any reason: An interest rate of 5.5% per annum (instead of 7.5%) will be applicable if the account is closed six months after its opening.
2. Death of the account holder: In the unfortunate event of the account holder's death, the principal amount along with accrued interest will be paid to the nominee or legal heir.
3. Compassionate grounds: The account can also be closed early in extreme cases, such as a life-threatening illness of the account holder or death of the guardian (in cases where the account is opened by a guardian on behalf of a minor). For verification purposes, the relevant documentation must be provided and in these cases, interest is paid on the principal amount.

Conclusion

The Mahila Samman Savings Certificate is a well-rounded scheme designed to enhance the financial well-being of women across India. By offering attractive returns, a secure investment platform, and easy accessibility, it not only promotes financial independence but also aligns with the larger vision of women empowerment. With its limited-time availability, women and guardians of young girls should seize this opportunity to invest in their financial futures.

Rohit Gyanchandani is Managing Director at Nandi Nivesh Private Limited