The finance ministry is on track to meet the budgeted National Small Savings Fund (NSSF) inflows of Rs 4.71 lakh crore in FY24, backed by significantly high growth in Senior Citizen Savings and Mahila Samman Savings Certificates plan, Finance Secretary TV Somanathan told Moneycontrol.
He added that small savings receipts are unlikely to be impacted even if the majority of people switch to the new direct tax regime, which does not have several exemptions and deductions, including 80C.
“Small savings receipts are coming as per budget and (we) do not expect (them) to be impacted by switching to the new direct tax regime. Mahila Samman Savings Certificates scheme and Senior Citizen Savings Scheme inflows are very significant. The growth in small savings is significantly high and we are on track to reach our small savings target,” Somanathan said in the interview with Moneycontrol.
“So far it is meeting our expectations because there were questions about how we will get so much in funds from small savings. But they are coming in. At least the scepticism on how we will reach the budgeted target is not there,” he added.
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In Union Budget 2023, the government raised the maximum deposit under the Senior Citizen Savings Scheme to Rs 30 lakh from Rs 15 lakh earlier and has seen a tremendous response as the deposit comes without the slightest risk and is backed by a government guarantee.
The Centre has been relying on the NSSF to finance part of its fiscal deficit. The government has budgeted NSSF funds to rise to Rs 4.71 lakh lakh crore in FY24 from Rs 3.96 lakh crore in FY23.
Small savings schemes offer attractive investment options with tax benefits under the old direct tax regime. Under Section 80C of the Income Tax Act, individuals can claim deductions of up to Rs 1.5 lakh per year for investments in these schemes.
“Many of the small savings instruments are attractive in their own right without the tax benefit also. For example, the public provident fund (PPF) interest earned at 7.1 percent is tax free. Even if one cannot take 80C deduction in the new direct tax regime, PPF will still be useful. PPF is the biggest item under small savings and will not be affected. I do not think adoption of the new tax regime will affect small savings much,” he said.
The interest earned in PPF is not taxable. It is a long-term investment option with an attractive rate of interest.
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There was a time when 80C tax exemption was confined to a few small savings types of instruments. Today there are lots of investments under 80C, including the National Pension Scheme tier II, principal paid on home loan equated monthly instalments (EMI), investments in Equity Linked Saving Schemes, etc.
Any impact on small savings will be offset by the growth in Senior Citizen Savings and Mahila Samman Savings Certificates plan, said Somanathan.
Meanwhile, speaking about the record capital expenditure target of Rs 10 lakh crore for FY24, Somanathan said that the government is on track to utilise the budgeted amount.
“Capex is doing very well. From an economic point of view, we don’t want to restrain capex, so we have lifted all cash controls on capital expenditure. Capex will be good for growth,” he said.
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