Do investments in Mahila Samman Savings Certificate qualify for section 80C tax benefit?

The government has clarified the tax implication on the Mahila Samman Certificate investments as it has received various queries in this regard.

In the Budget 2023, the government announced the Mahila Samman Savings Certificate, 2023. This program is specifically for female investors, and on March 31, 2023, the government published a gazette notice announcing the launch of a new small savings program.

Does investment under the Mahila Samman Certificate qualify for a rebate u/s 80C?

Clarifying the query, the Ministry of Finance via a notification issued on April 5, 2023, stated that the investment under scheme does not qualify for rebate under section 80C of Income Tax Act.

Also read: These Mahila Samman Savings Certificate features differ from other post office schemes

It means that your interest earned is taxable. However, as there is a limit of Rs 2 lakh per account and with 7.5% interest, there is no chance that your TDS will be deducted on this account if this is your only investment. However, it may differ depending on your tax slab and other FD interest income.

Also, it means that you cannot claim for tax benefits unlike tax saving fixed deposits.

Whether interest earned in the scheme qualifies for tax exemption?

Interest earned under the scheme is taxable, stated the finance ministry notification.Whether the maximum limit for investment of Rs 2 lakh is separate in case of minor?
Maximum limit prescribed in Rule 4(l) of Mahila Samman Savings Certificate, 2023 is for an Individual. As such minor limit is separate and investment up to – 2lakh can be made in the name of minor girl child.

Mahila Samman Savings Certificate: Details of the new savings scheme designed for women investors

The Mahila Samman Saving Certificate is a new small savings scheme aimed at encouraging women investors. The government introduced this scheme in the Budget 2023. The minimum investment amount is Rs. 1000, and the maximum amount is Rs. 1.5 lakh per financial year. Additionally, the scheme allows premature withdrawal after one year with some nominal penalty charges.

Mahila Samman Savings Certificate details

A Mahila Samman account can be opened by any woman for herself or on behalf of a little girl. The minimum investment is Rs 1000, and in multiples of Rs 100. The highest investment amount allowed under the program is Rs 2 lakh. The annual interest rate on deposits made under this scheme is 7.5%. The deposit matures two years after it is made, the account holder can request the funds by submitting a Form-2 application. After the first year from the date of account opening but before the account matures, the account holder can withdraw up to 40% of the balance by submitting a Form-3 application.

Also read: Mahila Samman Savings Certificate, 2023: Who can invest, interest payment, charges, how to open, premature closure

Pre-mature closure
(i) On the death of the account holder
(ii) On extreme compassionate ground (i) Life threatening decease of account holder (ii) death of the guardian on production of relevant documents.
(iii) After six months of account opening without mentioning any reason.
Note:-Scheme interest less by 2 per cent will be paid e.g. 5.5%.

How are fixed deposits taxed?

The Income Tax Act of 1961 states that interest on FDs is considered “income from other sources” and is therefore completely taxable. Your gross annual income includes the interest income from your FD, and the amount of tax due is estimated in accordance with the applicable tax rules.

When are you liable to pay tax on FDs?
If the interest on an FD is more than Rs 40,000, PAN users need to pay 10% tax and non-PAN users must pay 20% tax on the interest received.

At the time of the credit of annual interest, this interest would be subtracted as TDS (tax deducted at source). Note that the highest limit of Rs 40,000 only applies to individual FDs and does not apply to earnings as a whole.

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