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TDS (tax deducted at source) will not apply on interest earned on Mahila Samman Savings Certificate (MSSC), but interest income will be added to total income fortax calculation.
A Finance Ministry notification says the MSSC will be a scheme under “sub-clause (c) of clause (i) of sub-section (3) of section 194A of the Income-tax Act, 1961”. Section 194A deals with provisions relating to TDS on interest other than interest on securities. Tax is to be deducted under section 194A if interest (other than interest on securities) is paid to a resident.
Also read:Mahila Samman Savings Certificate: Should you invest?
However, this will not be applicable, as prescribed under sub-clause (c) of clause (i) of sub-section (3), on interest amounting to Rs 40,000 on any post-office deposit under any scheme framed and notified by the Central Government. The exemption limit for senior citizens is Rs 50,000.
Explaining the notification, Neeraj Agarwala, Partner, Nangia Andersen India, says it clarifies that if the interest earned on MSSC does not exceed Rs 40,000 in a financial year, then TDS will not apply.
“At 7.5 per cent rate of interest, the MSSC scheme will give a return of Rs 15,000 in one year and Rs 32,000 in two years. It can be said that no TDS will be applicable since the interest accrued in a financial year will be less than Rs 40,000,” he said. However, the interest will be added to the total income of the recipient for tax calculation, and if the sum exceeds the taxable limit, then tax at applicable rates need to paid. The income tax department said the notification will come into force from the date of its publication in the official gazette, which is May 16.
Finance Minister Nirmala Sitharaman in her speech for 2023-24 Union Budget had announced: “For commemorating Azadi Ka Amrit Mahotsav, a one-time new small savings scheme, Mahila Samman Savings Certificate, will be made available for a two-year period up to March 2025. This will offer deposit facility up to Rs 2 lakh in the name of women or girls for a tenor of 2 years at fixed interest rate of 7.5 per cent with partial withdrawal option.” The scheme was notified on March 31 and is now available for deposit.
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