Budget 2025: Key announcements for savings schemes

Finance Minister Nirmala Sitharaman presented the Union Budget 2025 on Saturday, February 1, outlining key measures to support savings schemes, particularly benefiting senior citizens and National Pension System (NPS) subscribers.

Fiscal deficit and borrowing plan

To finance the fiscal deficit, the net market borrowings from dated securities are estimated at Rs 11.54 lakh crore. The remaining funds will be sourced from small savings and other avenues, with gross market borrowings projected at Rs 14.82 lakh crore.

Relief for Senior Citizens with old NSS accounts

Recognising that many senior and very senior citizens hold old National Savings Scheme (NSS) accounts where interest is no longer payable, the government has proposed a major relief. Sitharaman announced that withdrawals from these accounts made on or after August 29, 2024, will be exempt from taxation.

Exemption on NSS withdrawals

The budget proposes tax exemption for withdrawals made from NSS accounts after August 29, 2024. This applies to both the principal amount deposited and the accrued interest, provided deductions were previously claimed under the scheme.

Parity for NPS Vatsalya accounts

Additionally, the Finance Minister proposed extending similar tax treatment to NPS Vatsalya accounts, aligning them with regular NPS accounts, subject to overall contribution limits. This move is aimed at ensuring uniformity and enhancing benefits for NPS subscribers.

These announcements are expected to provide significant relief to retirees and long-term savers, making small savings schemes more attractive and beneficial.