Collections through small saving schemes may be lower than the Budget Estimate, a senior Finance Ministry official has indicated. This would be despite good mop-up during the last two months of the current fiscal – February and March.

Meanwhile, collection through the Mahila Samman scheme is growing well. However, the scheme is unlikely to be extended beyond March 31, 2025.

“As more and more people are moving in the new tax regime, less money is being put in small savings and that could be the reason for lower mop-up,” the official explained. Interestingly, the government lowered the estimate for small savings in the interim budget of 2024-25 to ₹4.6 lakh crore from a revised estimate of ₹4.7 lakh crore for 2023-24. Further, it was lowered to ₹4.2 lakh crore in the full budget for FY25, presented in July.

₹4.2 lakh crore reflects investments from small saving receipts in special government securities. This also includes the redemption of loans of States, which are reinvested. The net receipt to the Centre is pegged at ₹3.8 lakh crore.

The small savings schemes currently in force are: Post Office Savings Account, National Savings Time Deposits (1, 2, 3 & 5 years), National Savings Recurring Deposits, National Savings Monthly Income Scheme Account, Senior Citizens Savings Scheme, National Savings Certificate, Public Provident Fund, Kisan Vikas Patra and Sukanya Samriddhi Account. These schemes offer assured returns in the range of 4 to 8.2 per cent per annum and enable investors to claim income tax exemption of up to ₹1.5 lakh under section 80C of the Income Tax Act.

However, the government introduced a new Income Tax Regime with lower tax rates but with the exemption as an optional one. The old Income Tax Regime continues for people who want to avail themselves of exemption but will be required to pay tax at slightly higher rates. Data shows that more than 70 per cent of Income Tax Return filers opted for the new tax regime during fiscal year 2023-24. This has impacted small savings.

Mahila Samman

Meanwhile, the Mahila Samman Scheme is gaining traction, with more than ₹30,000 crore deposited during the current fiscal year. The scheme will end on March 31, 2025. “We do not plan to extend the scheme beyond March,” the official quoted above said.

Finance Minister Nirmala Sitharaman, in her speech for the 2023-24 Union Budget, announced: “For commemorating Azadi Ka Amrit Mahotsav, a one-time new small savings scheme, Mahila Samman Savings Certificate (MSSCS), will be made available for two years up to March 2025. This will offer a deposit facility up to ₹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 a partial withdrawal option.”

TDS (tax deducted at source) is not applied to interest earned on MSSCS, but interest income will be added to total income for tax calculation. However, this will not be applicable to interest amounting to ₹40,000 on any post-office deposit under any scheme framed and notified by the Central Government. The exemption limit for senior citizens is ₹50,000. At a 7.5 per cent rate of interest, the MSSC scheme will give a return of ₹15,000 in one year and ₹32,000 in two years.

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