The shift to the new tax regime, now adopted by nearly 70 per cent of taxpayers, has impacted the government’s small savings schemes with lower collections, sources say. Popular schemes such as the Public Provident Fund (PPF), Sukanya Samriddhi Account (SSA), and National Savings Certificate have experienced a “significant” drop in both collections and subscriber numbers, particularly among younger investors opting for the new tax regime.
“There has been a significant decline, partly also because people now prefer investing in equities,” an official shared.
While these schemes offer high interest rates and secure returns, bear in mind that the interest rates are subject to review every quarter, and tax benefits of up to Rs 1.5 lakh under section 80C are available to those who only choose the old tax regime.
Official data available only until 2022 reveals that net deposits under the PPF scheme soared by around 134 per cent from Rs 5,487.43 crore in 2013-14 to Rs 12,846 crore in 2021-22. However, the government is bracing for lower collections in small savings for the current financial year.
As per government sources, projections suggest a slight reduction in FY25 small savings inflows, at around 8-10 per cent.
On a positive 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 was attributed to higher interest rates and a raised 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.
As a result, 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.