By Nilanjan Dey Feb 02, 2023
Union Budget 2023 will encourage women to save more, courtesy of a brand new deposit scheme that the Finance Minister has worked out for them, complete with a fairly attractive rate of interest and add-ons like partial withdrawals, subject to conditions.
Mahila Samman Bachat Patra will appear as a one-time scheme, to be made available for a 2-year period up to March 2025. An individual depositor can invest up to Rs 2 lakhs and earn an interest of 7.5%. It remains to be seen whether the government grants a tax-free status to the interest receipts, a move that will cheer many women in the months ahead. The issue of taxability has not been specifically addressed in the budget.
Women investors, a minority group with no specific small savings scheme dedicated exclusively to them (Sukanya Samriddhi Yojana does come close, but not close enough), are known to be breaking barriers in more ways than one. Considerable investments are being made these days by women in savings instruments, both new and traditional.
Insurers and asset management companies in particular have attracted many new women investors. Figures released by various authorities in the investment space, including institutional agencies, underscore the trend. Men, nevertheless, are still considerably ahead there is great dependence on male members of families for investments and related issues.
The proposed Mahila Samman Bachat Patra will compete with both market-driven and fixed-income instruments (that is, delivering variable and assured performance respectively) in which women can freely invest. Its nearest competitors will include fixed deposits and sundry other instruments with pre-determined returns.
While it is too early to say whether the government will tax interest earnings at a later stage, the astute investor will seek superior tax-adjusted returns. The market is likely to prefer instruments that offer high post-tax yield.
Indeed, a section of deposit mobilisation institutions, including certain banks, is currently providing 7.5-8% by way of interest. Successive adjustments in the repo rate, in a context marked by stiff inflationary numbers, have led to a gradual increase in interest rates. Such adjustments have been evident in the system in recent months.
Additionally, the budget has increased the investment ceiling for Senior Citizen Savings Scheme to Rs 30 lakhs from Rs 15 lakh, a move that is expected to help retirees. The limit for deposits in the Monthly Income Account Scheme has been enhanced as well. The new MIS ceiling is Rs 9 lakh (up from Rs 4.5 lakhs) in the case of single accounts. The same for joint accounts is now Rs 15 lakhs, up from RS 9 lakhs. Both SCSS and MIS are quite popular with the traditional, risk-averse investing fraternity.
(Nilanjan Dey is Director, Wishlist Capital and author of No Room For Less. The views expressed in the column are of the writer. He can be reached on [email protected])