Post Office Savings Scheme: People choose only the post offices to invest in a small savings scheme. There is some misconception among investors that if you invest in a post office then you will not have to pay tax on it. That is, people think that post office schemes are tax-free. Before investing, know whether the schemes offering tax-saving benefits are completely tax-free or not. Interest or returns received on many post office schemes are not tax-free. In this article, know which scheme is tax-free and which is not.
What is EEE Category in Income Tax?
EEE category in income tax means that investments, interest/returns, and maturity on such a scheme are not taxed. But let us tell you that many post office schemes are not tax-free. Interest/Return (TDS) on many post office schemes is not taxed. In such a situation, people think that these are tax-free schemes. However, taxpayers have to provide income from other sources while filing their Income Tax Return (ITR).
Post office savings account
There are neither tax saving benefits nor interest tax-free on deposits made in post office savings accounts.
Post office fixed deposit
Investments made in post office deposits for 5 years offer tax-saving benefits of up to Rs 1.5 lakh under section 80C. However, there is no tax benefit on short-term investments. The interest earned on this is also not tax-free.
Kisan Vikas Patra (KVP)
There is no tax benefit on this scheme and neither the interest earned is tax-free if you invest in KVP.
National Savings Certificate (NSC)
Investors get tax benefits of up to Rs 1.5 lakh in a financial year under Section 80C by investing in National Savings Certificates. However, it attracts tax on the interest income from the scheme.
Senior Citizen Savings Scheme (SCSS)
Senior citizen gets tax benefit of up to Rs 1.5 lakh under section 80C in a financial year by investing in Post Office SCSS.
National Pension System (NPS)
A deduction of up to Rs 50,000 can be claimed in a financial year under section 80CCD (1B) for investments in NPS accounts. Returns and lump sum commutation are tax-free under NPS.
Interest earned from PPF is not taxable
PPF has both tax benefits and tax-free features and the plan comes under the EEE category. The interest and maturity amount earned on PPF is tax-free.
Sukanya Samriddhi Yojana (SSY)
A parent or legal guardian of a girl child below the age of 10 years can open a Sukanya Samriddhi Yojana account at the post office and deposit up to Rs 1.5 lakh in a financial year. The scheme also has tax-free interest and maturity.
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