Post Office Schemes: People who want to save income tax need to know that not all Post Office schemes provide the benefit of Section 80C.
Post Office Schemes: People looking to save tax should keep in mind that not all Post Office schemes provide tax benefits under Section 80C of the Income Tax Act, 1961.
Income tax benefits under 80C cannot be availed in the following schemes:
Kisan Vikas Patra (KVP)
- Post Office Fixed Deposit (except 5 years tenure)
- Post Office Monthly Income Scheme
- Women’s Equal Savings Scheme
- Post Office Recurring Deposit
Let us take a look at these schemes in detail and know how the investments and interest earned are taxed.
Mahila Samman Savings Card
Mahila Samman Savings Certificate, 2023 of the Government of India is a small savings program specially designed for women. It tries to inculcate the habit of saving money among Indian women. A resident Indian female recipient is eligible; There is no upper age limit.
Taxation
Tax is applicable on the interest received under this scheme. This means that unlike tax-saving fixed deposits, you will not get any tax benefits. Interest income from Mahila Samman Savings Certificate is subject to taxation. Depending on the tax bracket of each individual and the total interest income, TDS is deducted.
National Savings Time Deposit Account
Fixed deposit accounts can be opened by depositors for one, two, three or five years. On the other hand, you can extend the tenure of your account by formally applying at the post office.
The interest rates offered for 1 year, 2 years and 3 years are 6.9%, 7.0% and 7.1% respectively.
Taxation
Income tax benefits are given only on post office fixed deposits which last for five years. Under Section 80C of the Income Tax Act 1961, depositors are eligible to get income tax exemption up to Rs 1.5 lakh. There is no tax benefit for other deposits like one, two, three.
National Savings Recurring Deposit Account
The guaranteed return scheme offers an annual interest rate of 6.7% and has a lock-in period of five years. The interest rate is added on quarterly basis. One person or maximum 3 adults (Joint A or Joint B) can open the account. The RD account holder has to deposit a minimum of Rs 100 or in multiples of Rs 10 in a month. There is no limit on maximum deposit.
Kisan Vikas Patra
Kisan Vikas Patra is not eligible for 80C deduction, returns are fully taxed.
The accumulated interest is paid annually and is taxed under “Income from other sources”. However, withdrawals made after the scheme matures are not subject to Tax Deducted at Source (TDS).
Post Office Monthly Income Scheme
Individuals can invest a minimum of Rs 9 lakh. The maximum limit for joint account is Rs 15 lakh.
Taxation
The interest earned is taxable, and does not come under Section 80C of the Income Tax Act, 1961. In case of senior citizens, TDS will be deducted on interest above Rs 40,000 and Rs 50,000. 7.4 percent interest can be earned annually.
