Finance Minister Nirmala Sitharaman unveiled a new small savings scheme — Mahila Samman Savings Certificate (MSSC) — in Budget 2023. It is a one-time scheme that can be opened in the name of a woman or girl of any age. Mahila Samman Savings Certificate will be available for a two-year period between 2023 and 2025. It offers a fixed interest rate of 7.5 per cent for a tenure of two years. Will it give you a better return when compared to fixed deposits in leading banks or post office time deposits? Who should invest in Mahila Samman Savings Certificate? ET Wealth Online explains.
All you need to know about Mahila Samman Savings Certificate
The interest rate of Mahila Samman Savings Certificate will be fixed at 7.5 per cent for the entire tenure of two years. The minimum investment starts from Rs 1,000 while the maximum investment limit can go up to Rs 2 lakh. The interest is compounded quarterly but paid on maturity.
Moreover, you can withdraw up to 40 per cent of the balance after one year. In case of the death of the account holder or case of extreme compassionate grounds such as life-threatening disease and/or death of the guardian, you can prematurely close the Mahila Samman Savings Certificate account without penalty. Further, you can close the account after six months of opening it without giving any reason with a penalty. Do note that if you prematurely withdraw funds from this scheme, the interest rate will be cut by 2 percentage points. So, you would get an interest rate of 5.5 per cent.
There will not be any income tax benefits for investing in Mahila Samman Savings Certificate. Further, the interest earned on Mahila Samman Savings Certificate will be taxable according to the income tax slab applicable to you.
Here is how the return earned on the Mahila Samman Savings Certificate will be calculated
Mahila Samman Savings Certificate is similar to cumulative fixed deposit or post office time deposit schemes where the interest is calculated quarterly and accumulated along with the invested principal. For instance, you invest Rs 2 lakh. At the end of the first quarter, you will get interest of Rs 3,750. This amount will be reinvested and at the end of the second quarter, you will get interest of Rs 3,820. Accordingly, you will get Rs 2,32,044 at the time of maturity.
Mahila Samman Savings Certificate vs bank fixed deposits vs small savings accounts
Given the tenure of two years, this short-term small savings scheme is at par with bank fixed deposits and Post Office time deposits of a similar nature. The interest rate of fixed deposits in private and public sector banks, including State Bank of India (SBI), HDFC Bank, ICICI Bank, and Axis Bank are around 7-8 per cent, depending on the term.
As on May 4, 2023, SBI offers an interest rate of 6.8 per cent on a deposit maturing in less than two years, HDFC Bank offers an interest rate of 7 per cent. ICICI Bank offers an interest rate of 7.1 per cent for deposits maturing in two years. Kotak Mahindra Bank gives an interest rate of 7.2 per cent for deposits maturing between more than 23 months and less than two years. Among public and private sector banks, DCB Bank offers the highest interest rate of 8 per cent on two-year FDs. As you can see, for a two-year period, the interest rate earned on Mahila Samman Savings Certificate is higher than many bank FDs.
Similarly, the Post Office two-year time deposit offers an interest rate of 6.8 per cent.
Other small savings schemes such as the Public Provident Fund (PPF) offers an interest rate of 7.1 per cent for the April-June 2023 quarter. You can earn an interest rate of 7.7 per cent on the National Savings Certificate (NSC). However, both these schemes have a much longer tenure than that of Mahila Samman Savings Certificate. While PPF has a tenure of 15 years, NSC is a five-year-long scheme. So, your money will be invested for a longer period in these small savings schemes.
Who should invest in Mahila Samman Savings Certificate?
For women who are planning to park money for a short time, the Mahila Samman Savings Certificate can be considered as an alternative to one-to-two-year fixed deposits or other fixed income products such as post-office time deposits or PPF. Explaining it further, Dev Ashish, a SEBI Registered Investment Advisor (RIA) and Founder, StableInvestor, said, “The women-specific Mahila Samman Savings Certificate provides an interest rate that is up to one per cent greater than what the majority of the large banks offer for FDs with comparable tenure. So given that the returns are comparatively higher than bank FDs and it also offers the partial withdrawal option, the Mahila Samman Savings Certificate can be a suitable alternative to 1-2 year FDs and post office time deposits for women for the short term.”
The only concern or rather limitation is that only up to a maximum of Rs 2 lakh can be deposited. So given this limitation, this well-intentioned scheme is mostly targeted at women who generally do not park money in formal small savings instruments, he added.
"Mahila Samman Savings Certificate could be a good option for those who are planning to invest up to Rs 2 lakh for a short duration of two years. Do remember that premature withdrawal is allowed only after six months and it attracts a penalty of 2 per cent. So plan well before investing into it," said Abhishek Kumar, SEBI Registered Investment Advisor (RIA) and Founder, SahajMoney.
"Current rates offered by the Mahila Samman savings scheme are higher than most bank deposit rates, but the amount that can be invested is capped at Rs 2 lakh. This may be a good option for women seeking high safety and a shorter tenor of locking in money as compared to many other small savings instruments," said Vishal Dhawan, a CFP and Founder of Plan Ahead Wealth Advisors.
For women earners with larger surplus and bigger asset base, the small limit of Rs 2 lakh may not be of much use and they can skip it to reduce cluttering their savings portfolio, Dev Ashish added.
