As BoI becomes first bank to launch Mahila Samman Savings Certificate, here's what you need to about it

• The minimum deposit allowed is ₹1,000, while the cap on maximum deposit is ₹2 lakh.
  
• This scheme provides a fixed interest rate of 7.5% per annum, which is credited quarterly and paid at the time of closure of the account.
  
• After one year from the date of opening of the account, the account holder can withdraw up to 40% of the account balance.
  

Bank of India, one of the largest public sector banks in India, has launched the Mahila Samman Savings certificate, becoming the first bank to launch the small savings scheme designed specifically for women and girls. Here is everything you need to know about the scheme.


The origins

Union Finance Minister Nirmala Sitharaman unveiled the Mahila Samman Savings Certificate scheme in her Budget Speech 2023-24. The scheme is meant for either a woman herself or the legal guardian of a young girl.

It has been available only through a post office since inception, however, going ahead it will be available through all major banks as well. “It is expected that the Mahila Samman Savings Certificate will soon be made available at all scheduled commercial banks, and eventually investors should be able to open accounts digitally via netbanking and internet banking,” says Adhil Shetty, chief executive officer, BankBazaar.com.

Deposit amount & maturity period

Under the Mahila Samman Savings Certificate scheme, the minimum deposit amount required is ₹1,000, with the option to deposit in multiples of ₹100. On the other hand, the maximum deposit allowed is ₹2 lakh for a single account or across all Mahila Samman Savings Certificate accounts held by an individual.

This scheme provides a fixed interest rate of 7.5% per annum. The interest will be credited quarterly and paid at the time of closure of the account.

The scheme has a maturity period of two years. The scheme offers a partial withdrawal facility. After one year from the date of opening of the account, the account holder is eligible to withdraw up to 40% of the account balance.

Taxation of Mahila Samman Saving Certificate scheme

The Central Board of Direct Taxes (CBDT) has notified that tax deducted at source (TDS) would apply to the Mahila Samman Saving Certificate scheme.

However, as per Section 194A of the Income Tax Act, TDS will apply only when the interest received from the scheme in a financial year is more than ₹40,000 or ₹50,000 (in the case of senior citizens).

Since the interest amount of this scheme for a maximum of ₹2 lakh investment for two years does not exceed ₹40,000, TDS is not deducted from the interest received. The interest earned will be added to the recipient’s total income and applicable taxes need to be paid if the total income exceeds the taxable limit.