Tax Saving Tips: Not every post office scheme offers 80C benefits! Invest in these schemes for tax saving..
Post Office's small savings schemes are quite popular among common investors. Apart from the security and fixed returns provided by the Central Government's guarantee, tax saving is also the reason for this popularity.
Not every small savings scheme gets the benefit of 80C
Many people think that investment in all small savings schemes of post office gets tax exemption under Section 80C of the Income Tax Act. But this notion is not correct. There are many such schemes of post office, in which investing does not save tax. We have already discussed them.
But if you want to invest to save tax, then you should look at such schemes of the post office, in which investing gives tax benefits under Section 80C. Here we are going to talk about some such important schemes.
Public Provident Fund (PPF)
The amount deposited in the Public Provident Fund (PPF) gets tax benefits under Section 80C of the Income Tax Act. That is, tax exemption is available on investments up to Rs 1.5 lakh every year. Currently, the amount deposited in the PPF account gets compounding interest at the rate of 7.1% per annum. The interest deposited in this scheme is paid only at the time of maturity and the entire amount is tax-free. The lock-in period of PPF is 15 years. It is one of the few schemes which provide EEE benefits in terms of tax.
Sukanya Samriddhi Yojana (SSY)
Under the Sukanya Samriddhi Yojana (SSY) scheme, an account can be opened in the name of daughters below 10 years of age. Currently, it is getting interest at the rate of 8.2% per annum, which is the highest among small savings schemes.
A minimum of Rs 250 and a maximum of Rs 1.5 lakh can be deposited every year in this scheme. The interest is paid at the time of maturity. After the age of 18, the girl can operate her Sukanya Samriddhi Yojana account herself.
The scheme matures 21 years after opening the account or when the daughter gets married after the age of 18 years. But closing the account within a month of the date of marriage or after 3 months is not allowed.
EEE tax benefit is also available in this scheme. That is, under section 80C, tax exemption is available on a maximum deposit of Rs 1.5 lakh in a year and the interest received on the deposit amount and the maturity amount are also tax-free.
Senior Citizen Savings Scheme (SCSS)
Any person aged 60 years or above can invest in this scheme. Apart from this, such retired civilians i.e. non-military employees can also open an account in this scheme, whose age is more than 55 but less than 60 years.
Retired defense personnel can also join this scheme between the ages of 50 years to 60 years. But for both these categories of employees, it is necessary to invest in this scheme within 1 month of receiving retirement benefits. A minimum of Rs 1000 and a maximum of Rs 30 lakh can be deposited in the scheme.
The maturity period is 5 years, but this account can be extended for another 3 years within 1 year of maturity. Such accounts will get interest at the rate applicable at the time of maturity.
Investments made under this scheme get tax benefits under Section 80C of the Income Tax Act 1961, but tax is levied if the interest income exceeds Rs 50,000 during a financial year.
Post Office Time Deposit (TD)
Another name for Post Office Time Deposit is the Post Office National Savings Time Deposit Account. Under this scheme, money can be deposited for 1 year, 2 years, 3 years, or 5 years. The government reviews the interest rate on this scheme every 3 months.
Currently, 6.9% interest is being given on a 1-year deposit, 7.0% on 2 years, 7.1% on a 3-year deposit, and 7.5% on a 5-year time deposit. The minimum investment is Rs 1000, while there is no maximum investment limit. The interest amount is paid at the end of every year. If the interest is not withdrawn from the TD account even after the due date, then no additional interest is given to it.
Investors can apply to deposit the interest amount directly in their savings account. Under Section 80C of the Income Tax Act, tax exemption on deposits up to Rs 1.5 lakh in a year is available only on 5-year TD. But tax has to be paid on the interest as per the rules.
National Savings Certificate (NSC)
A minimum amount of Rs 1000 can be deposited in a National Savings Certificate (NSC). There is no maximum investment limit. The current interest rate on NSC is 7.7% (compounded annually). Interest is paid only on maturity. The maturity period is 5 years. Investments up to Rs 1.5 lakh per year are eligible for tax exemption under Section 80C of the Income Tax Act.
One special feature of NSC is that it can be used as security to take loans from banks or housing finance companies. The interest received on National Savings Certificate is not tax-free, but the tax liability is considered in the year of payment of interest at the time of maturity.
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