Tax liability on small saving schemes like PPF, NSC, SSY, SCSS, Kisan Vikas Patra and post office schemes

Tax liability on small saving schemes.

Investors use small saving schemes to save money for retirement. When you make an investment, you should make sure that you adjust your returns for the following two invisible expenses:-

1. Your return should be more than the inflation rate to make sure your investment generates positive inflation-adjusted returns. 
2. The tax liability on the investment. If your tax liability is high, your tax-adjusted returns might be low. 

So, to sum up, you should calculate your tax-adjusted and inflation-adjusted returns. Small saving schemes offer various benefits to the investors to save money for the long term. Here we list out the tax liability for the small saving schemes to make sure that your tax liability is taken care of while calculating your returns. 

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Tax liability on various small saving schemes

The tax liability on various small saving schemes is as follows:-

• PPF- It falls under the EEE category. This means that the investments of up to Rs 1.5 lakhs per year, interest amount and the final maturity amount are all exempt from taxation. 
   
• Sukanya Samridhi Yojana (SSY)- This scheme is also under the EEE category. This means that the investments of up to Rs 1.5 lakhs per year, interest amount and the final maturity amount are all exempt from taxation. 
   
• Senior Citizens Saving Scheme (SCSS)- This scheme is taxed on the interest amount if it exceeds Rs 50,000 in a year. The TDS is deducted as well, and the excess interest amount is taxed at the income tax slab.
   
• National Saving Certificate (NSC)- This scheme is taxed at maturity. The investments are eligible for 80C benefits, but the maturity amount is taxed at the income tax slab.
   
• Fixed Deposits- If the time deposit is more than five years, it is eligible for 80C deductions. But the interest earned is subject to income tax at the income tax slab of the assessee.
   
• Recurring Deposits- It is like a fixed deposit, but the interest amount is added to the fixed deposit to compound the returns. The interest earned is taxed at the income tax slab.
   
• Kisan Vikas Patra- No income tax benefit is applicable to this scheme, and all the returns are taxable in the hands of the investor. 
   
• Post office monthly income scheme- This scheme has no benefits in income tax, and the entire returns are taxable in the hands of the investor. 

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If you save in small saving schemes, you can save money for your retirement. You should consider a tax planner or plan the taxes yourself to get the maximum benefits for the small saving schemes. PPF, NSC, Sukanya Samridhi Yojana, etc., are eligible for tax benefits. You can save your taxes, and remember that money saved is money earned.

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