The new tax regime, now embraced by nearly 70% of taxpayers, has significantly impacted the government’s small savings schemes, leading to a noticeable drop in both collections and subscriber numbers. Popular schemes such as the Public Provident Fund (PPF), Sukanya Samriddhi Account (SSA), and National Savings Certificate have been particularly affected, especially among younger investors opting for the new tax regime.
There has been a significant decline, partly also because people now prefer investing in equities.
While these schemes continue to offer high interest rates and secure returns, their attractiveness is somewhat diminished by the fact that the interest rates are subject to quarterly reviews. Additionally, the tax benefits of up to Rs 1.5 lakh under Section 80C are available only to those who opt for the old tax regime.
Official data up to 2022 showed that net deposits under the PPF scheme had soared by around 134%, from Rs 5,487.43 crore in 2013-14 to Rs 12,846 crore in 2021-22. However, the government anticipates lower collections in small savings for the current financial year. Projections suggest a slight reduction in FY25 small savings inflows, estimated at around 8-10%.
On a brighter note, the Senior Citizen Savings Scheme saw collections nearly triple to Rs 1.12 lakh crore last financial year, with an increased subscriber count. This growth is attributed to higher interest rates and an increased maximum deposit limit, though no major hikes are expected this year.
Regarding the Mahila Samman Savings Scheme, the government is unlikely to extend the Mahila Samman Savings Certificate beyond March 2025.
Consequently, the Centre has set a lower collection target for the National Small Savings Fund (NSSF) in FY25. The Union Budget for FY25, presented in July, targets NSSF collections at Rs 4.2 trillion, down from Rs 4.67 trillion in the Interim Budget.
The shift towards the new tax regime and a preference for equities among younger investors have led to a notable decline in small savings scheme collections. While some schemes like the Senior Citizen Savings Scheme have seen growth, the overall trend points to a challenging year ahead for small savings collections. The government’s adjusted targets reflect this new reality, indicating a cautious approach to future projections.
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