Mahila Samman Savings Certificate Gets Exempted From TDS On Interest Earnings

The Mahila Samman Savings Certificate (MSSC) scheme, which encourages women to invest, won't charge any tax on the interest earnings.

The Union Ministry of Finance has included this scheme under sub-clause (c) of clause (i) of sub-section (3) of section 194A in the Income-tax Act, 1961. Thus TDS on interest up to Rs 40,000 is exempted.

Let’s clarify it further by calculating the potential earnings of the MSSC scheme.

Investing the maximum amount of Rs 2 lakh for a two-year tenure with the interest compounding quarterly will take the total accrued amount to Rs. 2,32,044. Since the interest earned in a financial year would be less than Rs 40,000, hence no TDS would be applicable.

However, the interest earned will be added to the recipient’s total income for tax calculation. If the sum exceeds the taxable limit, the applicable tax rate must be paid.

MSSC

This scheme allows women to open an MSSC account for themselves or on behalf of a minor girl, with the deadline for account opening set as March 31, 2025. Under this investment scheme, a minimum of Rs 1,000 must be invested. The maximum investment limit is set at Rs 2 lakh, and the deposited amount earns interest at a rate of 7.5 per cent per annum, compounded quarterly.

The account can be opened at post offices or authorised banks, by filling Form-I, and is available nationwide from April 1, 2023.

The maturity period of the scheme is two years from the deposit date.

Additionally, after the first year, but before maturity, the account holder can withdraw up to 40 per cent of the balance by submitting Form-3.

Closure of the account before maturity is only permitted in special cases, such as the account holder’s death or on compassionate grounds, such as medical emergencies or the guardian’s death.

Comparing MSSC With Bank Deposits

Several banks provide special rates for women depositors.

For instance, Indian Bank offers a 400-day fixed deposit with an interest rate of 7.15 per cent for women. Punjab & Sind Bank’s (PSB’s) Grih Lakshmi Fixed Deposit Scheme provides a 25 basis point (bps) premium to fixed deposits where a woman is the primary account holder.

When comparing MSSC with bank deposits, the bank deposit interest rates tend to be slightly lower.

But considering the factors of higher tenure and investment limit with banks, the slight difference in rates is not much.

Banks also provide greater liquidity compared to MSSC, though premature withdrawals from bank deposits may incur a penalty. But now, after the tax notification, MSSC seems suitable for individuals in lower income groups who can leverage the scheme effectively.