No interest on National Savings Scheme from Oct 1: What it means for you
Subscribe to enjoy similar stories. Chartered accountant Sujal Pravin Shah (62) was in for a big surprise recently. He had invested in the National Savings Scheme (NSS) in 1987.
The scheme was stopped for fresh investment in 1992, but the government kept paying interest on it. Shah let the interest payment compound. A recent government notification, however, stumped him.
The government said it would stop paying interest on NSS accounts from October 1. For the period from 1 March 2003 to 30 September 2024, the NSS interest rate was 7.5% per annum. The government’s decision left Shah and other investors in the small savings scheme in a quandary.
If Shah withdraws the amount now, both the principal and interest will be taxable. "I had earmarked my NSS funds for my retirement and succession planning. I had plans to withdraw the amount in such a way that I attract the least tax on it.
The recent notification triggers a forced withdrawal. You cannot treat forced withdrawal the same as a voluntary withdrawal. Such a sudden change in the rule is an absolute breach of trust," said Shah.
Some people have maintained their accounts to leave a legacy for their family members. This is because if the legal heirs of NSS account holders withdraw the amount after their death, the entire amount becomes tax free. "It is as good as a life insurance policy for NSS account holders," said Shah.
NSS-87 was launched in 1987 and discontinued in 1992. A fresh series, NSS-92, was launched in 1992 but was discontinued in 2002. No other NSS schemes have been launched since then.
Read more on livemint.com
