Mahila Samman Savings Certificate: Should you invest?

Budget 2023 announced a new fixed income scheme exclusively for women. Called the Mahila Samman Savings Certificate (MSSC), the new investment avenue will be available from April 1, 2023. Here’s more about the scheme and a comparison with other fixed income options.

What is it about?

The Finance Minister announced in the Budget that a maximum of ₹2 lakh can be invested in the MSSC. This product will have a tenor of two years and carry an annual interest rate of 7.5 per cent.

Now, the deposit facility will be made available for a two-year period up to March 2025. Deposits can be opened in the name of women or girls.

There is a partial withdrawal facility offered to investors, though the minimum lock-in or penalty or amount that can be taken out while doing so are not clear yet.

The taxation part of the MSSC is also not known as of now. But given that all fixed deposit-like instruments that enjoy 80C deductions — National Savings Certificate, 5-year bank FD, Senior Citizens Savings Scheme) — have a lock-in of five years, it is likely that the two-year MSSC may not enjoy tax benefits.

It is expected that the MSSC will be available at post offices and select public sector banks.

How does it compare with other options?

When compared with other small savings options of similar tenor or even with bank FDs, the interest rate on offer with the MSSC seems reasonable.

The two-year post office time deposit, for example, offers 6.8 per cent interest. Small finance banks and select non-banking finance companies (NBFCs) offer 7.25-8 per cent on two-year fixed deposits.

Top best of public sector and private banks give in the range of 7-7.5 per cent interest for two-year tenors.

Data from Clearing Corporation of India shows that the government securities maturing in 2025 (05.22 GS 2025 and 07.72 GS 2025) are available with yields of 7.25 per cent and 7.26 per cent.

Should you invest?

The amount that is allowed for investment is not high enough, at just ₹2 lakh. And with a two-year lock-in, the amount cannot be earmarked for any medium- or long-term goal either. Nor is there any clarity on the tax treatment of the product. If it is fully taxable, which is quite likely, the post-tax returns may not be attractive, especially for those in the higher slabs.

The interest on offer itself is not that bad at 7.5 per cent and is in a similar zone as what comparable options offer. Perhaps the government could have sweetened the deal by offering a more attractive 8 per cent or more on the MSSC, especially as many market experts believe that we are close to the peak of the interest rate cycle.

Perhaps, given the partial withdrawal facility, the MSSC could be used to park a part of your emergency funds.

For any other life goal, the MSSC may not be suitable as the maximum investment amount is modest and the tenor is short.

Also, given that the scheme is open only to women, with no features for senior citizens among them, the interest around the product may be limited.

If you are a woman who has just started working and want a safe option to save small amounts, you can consider the MSSC.