Small savings schemes in focus after Budget 2023 — Check who benefits

Small savings scheme investors have a reason to cheer as Budget 2023 made changes to some avenues and introduced a fresh one. Finance Minister Nirmala Sitharaman proposed raising the maximum deposit limit for Senior Citizen Savings Scheme (SCSS) to Rs 30 lakh. Additionally, the maximum deposit limit for Monthly Income Scheme (MIS) is to be enhanced from Rs 4.5 lakh to Rs 9 lakh for a single account and from Rs 9 lakh to Rs 15 lakh for a joint account.

The government has also introduced a one-time new small savings scheme 'Mahila Samman Bachat Patra'.

Now, presuming that investors who rely on the interest income from small savings schemes will benefit from the announcements as these schemes encourage citizens to save regularly as some of them allow a flow of income, let's understand the changes in detail:

The FM has enhanced the maximum amount of money that can be invested in the senior citizen saving scheme (SCSS) to Rs 30 lakh, from Rs 15 lakh. This will allow senior citizens to deposit more money into their SCSS account and receive a higher interest rate on their savings.

An investor can park money in SCSS after attaining the age of 60 years. Also, an individual who has opted for the Voluntary Retirement Scheme (VRS) is eligible to invest in the scheme from the age of 55 years. SCSS offers tax benefits under section 80C of the Income-Tax (I-T) Act.

The scheme offers a regular source of income for senior citizens.

For the March quarter, the interest rate offered under SCSS is 8 percent.

Budget 2023 proposed a deposit limit hike for MIS from Rs 4.5 lakh to Rs 9 lakh per individual, allowing individuals to potentially earn a higher income from their investments. For joint account holders, the limit has been raised to Rs 15 lakh.

MIS is a savings scheme offered by the Department of Post (DoP) with a fixed monthly income to its depositors. While the account is active, investors can receive a monthly sum in the form of interest. The interest rate is set by the government on a regular basis — the current rate of interest stands at 7.1 percent.

The Budget 2023 introduced this scheme for women investors to commemorate 'Azadi ka Amrit Mahotsav'. This scheme is a one-time small savings scheme that will be made available for a period of two years, up to March 2025. Under this scheme, women and girls can invest up to Rs 2 lakh for a tenor of 2 years with an interest rate of 7.5 percent per annum with the facility of partial withdrawal.

According to CA Manish P. Hingar, Founder of Fintoo, this will help women investors to start investing for their short-term financial goals and needs.

"Compared to other small savings schemes like Sukanya Samriddhi Yojna which has a maximum investment limit of Rs 1.5 lakh in a financial year, and also has a long lock-in period of 21 years, the Mahila Samman Savings Certificate provides an opportunity to invest up to Rs 2 lakh for a tenure of 2 years, making it a better investment option for female investors," he said.