Not all post office savings schemes entail Section 80C tax benefits! Here’s what you need to know | Business – Times of India

by The Technical Blogs


Post office savings schemes: When it comes to saving taxes, it’s important to understand that not all post office schemes offer benefits under Section 80C of the Income-tax Act, 1961.
As per an ET report, the following schemes do not offer section 80C benefits:
1. Kisan Vikas Patra (KVP)
2. Post Office Time deposits (excluding the 5-year tenure)
3. Post Office Monthly Income Scheme
4.Mahila Samaan Savings Scheme
5. Post Office Recurring Deposits

Here is each of these schemes and how investments and interest earned are taxed:

Post Office Monthly Income Scheme
Individuals can invest up to Rs. 9 Lakhs, with a minimum investment of Rs. 1,500, while joint accounts have a maximum limit of Rs. 15 Lakhs.
In terms of taxation, the interest earned is taxable and does not qualify for Section 80C benefits under the Income Tax Act, 1961. Tax Deduction at Source (TDS) is applicable on interest earned exceeding Rs 40,000 for regular citizens and Rs 50,000 for senior citizens. The scheme offers an annual interest rate of 7.4%.
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Kisan Vikas Patra
Kisan Vikas Patra does not qualify for 80C deductions, and its returns are fully taxable. The accumulated interest is paid annually and taxed under “income from other sources.” However, withdrawals after maturity are not subject to Tax Deduction at Source (TDS).
Mahila Samman Savings Certificate
The Mahila Samman Savings Certificate, 2023, is a small savings program by the Government of India, tailored for women to encourage saving money. Any resident Indian woman can participate, with no upper age limit.
Regarding taxation, interest earned under this scheme is subject to taxes. Unlike tax-saving fixed deposits, there are no tax benefits associated with it. The interest income from Mahila Samman Savings Certificates is taxable, and Tax Deducted at Source (TDS) is deducted based on the individual’s tax bracket and total interest income.
National Savings Time Deposit Account (TD)
The time deposit account allows depositors to open accounts for one, two, three, or five years. Additionally, depositors can extend the term by applying formally to the post office.
Interest rates vary based on the duration of the deposit, with rates for one, two, and three years being 6.9%, 7.0%, and 7.1% respectively.
In terms of taxation, only time deposits lasting five years offer benefits for income tax under Section 80C of the Income Tax Act of 1961. Depositors can claim tax exemptions of up to Rs. 1.5 lakh. However, there are no tax benefits for deposits with durations of one, two, or three years.
National Savings Recurring Deposit Account (RD)
The guaranteed return scheme provides an annual interest rate of 6.7%, compounded quarterly, with a lock-in period of five years. Individuals or up to three adults (Joint A or Joint B) can open the account. The minimum monthly deposit requirement is Rs 100, or in multiples of Rs 10, with no maximum deposit limit.


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