NEW DELHI: The government expects as much as 10% of the seven lakh senior citizens, who are using the full benefit of the Senior Citizens Savings Scheme (SCSS), to take advantage of the decision to double the investment limit to Rs 30 lakh from next financial year.
Of the 50 lakh subscribers of the scheme, which currently offers 8% annually, around 15% currently use the entire limit, data available with the finance ministry showed. While contribution up to Rs 1. 5 lakh is eligible for benefits under section 80C of the Income Tax Act, interest under the scheme is taxable.
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Tax experts suggest that the post-tax returns need to be factored in although government officials believe that despite tax on the earnings, it still offers among the best re-turns. For someone in the 30% tax bracket, the post-tax return works out to around 5. 6%. The decision to enhance the limit follows demands from some of the subscribers.
The government has budgeted for a significant part of the increase in the small savings kitty to come from the SCSS, officials indicated. During the next financial year, the government expects theflows into small savings schemes, which include public provident fund and post office deposits, to increase, after seeing adip during the current financial year. The net accretion is budgeted to increase 7. 4% to over Rs 4. 7 lakh crore.
The other source of accretion is expected to come from the Monthly Income Scheme, where the investment limit has been doubled to Rs 9 lakhfor single account and to Rs 15 lakh from Rs 9 lakh for joint accounts. The scheme currently offers 7. 1% to subscribers.
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The third element where gains are expected is through the new instrument for women, Mahila Samman Savings Certificate, which will come with a two-year tenure and will be open for subscription up to March 2025.
Although there is no estimate of how much could flow in, government officials said that it will be an attractive tool that can be used to deposit funds for every segment. The details of the scheme are yet to be worked out, and it is seen as an outreach to women voters by the BJP government at the Centre and offers 7. 5% interest. “Barring the interest rate for senior citizens, none of the banks offer this kind of returns through fixed deposits,” said an official.
