Post Office Small Saving Schemes: The post office offers a multitude of schemes, some subject to tax deductions while others enjoy tax exemption. It is important to note that certain schemes do not qualify for tax exemption under section 80C of the Income Tax Act, 1961. Additionally, if the transaction limit exceeds the prescribed threshold, TDS (deduction at source) will be applicable.
Conversely, if the transactions conducted within the schemes remain within the limit, TDS will not be deducted. TDS refers to deduction at source, a mechanism designed to directly collect taxes from an individual’s income to prevent tax evasion. Let’s delve into the post office schemes, some of which are subject to TDS deductions while others are exempt.
Post Office RD Scheme: The common citizens’ limit for the post office RD scheme is Rs 40,000, whereas senior citizens enjoy a higher limit of Rs 50,000.
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Post Office Time Deposit: Deposits made for a period of five years in the post office time deposit scheme qualify for tax exemption under section 80C of the Income Tax Act up to Rs 1.5 lakh. However, TDs with a tenure of one, two, and three years are subject to tax. The interest earned during these tenures is also taxable.
Post Office Monthly Income Plan Account: If the interest received under this scheme exceeds the range of Rs 40,000 to Rs 50,000, taxes are applicable. This scheme does not fall under tax exemption as per section 80C.
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Mahila Samman Bachat Patra and Senior Citizen Saving Scheme: TDS is deducted under the Mahila Samman Savings Letter Scheme, while the Senior Citizen Saving Scheme enjoys tax exemption under Section 80C.
NSC and PPF: Under the NSC scheme, up to Rs 1.5 lakh is tax exempt, and TDS is not applicable to the interest earned. The PPF scheme is completely exempt from taxes.
Kisan Vikas Patra: Although this scheme does not qualify for tax exemption, TDS is not applicable to the amount withdrawn upon maturity of the scheme.
