Mahila Samman Certificate offers tax relief; no TDS to be deducted on interest income

From April 1, 2023, women can benefit from the newly launched Mahila Samman Saving Certificate Scheme. This special saving scheme offers an interesting twist when it comes to taxation. Instead of paying a TDS (Tax Deducted at Source) on the scheme, the income earned from the invested amount will be added to the account holder's total income, subjecting it to taxation based on their applicable tax slab. This announcement has been made by the Central Board of Direct Taxes (CBDT) through a recent notification.

As per the CBDT notification, if the interest received from investing in the Mahila Samman Savings Certificate does not exceed Rs 40,000 per year, then no TDS needs to be paid. Taking into account an annual interest rate of 7.5 percent, a maximum investment of up to Rs 2 lakh will generate an interest income of Rs 15,000 in the first year and Rs 32,000 in the second year. Since the interest income falls below the Rs 40,000 threshold, TDS is not applicable in this scenario.

It is important to note that investing in the Mahila Samman Savings Certificate does not provide any tax benefits under Section 80C of the Income Tax Act, 1961. This means that account holders cannot claim a tax exemption on their investment.

The Mahila Samman Saving Certificate Scheme was announced by Finance Minister Nirmala Sitharaman during this year's budget presentation. The scheme became operational on April 1, 2023, and offers women a 7.5 percent annual interest rate on their deposits for a two-year period. The scheme is exclusively designed for women, including minors whose accounts can be opened by their guardians. Accounts can be opened under this scheme until March 31, 2025, in the name of either a woman or a minor girl.

The minimum deposit required to open an account in the Mahila Samman Saving Certificate Scheme is Rs 1,000, with a maximum deposit limit of Rs 2 lakh. Investors will receive 7.5 percent interest annually, and the interest amount will be credited to their accounts quarterly.

Upon maturity of the scheme after two years, account holders can apply for the amount through Form-2. Additionally, after completing one year in the scheme, account holders have the option to withdraw 40 percent of the deposited amount. In the case of accounts opened for minors, guardians can withdraw the maturity amount by submitting Form-3.