Category
Taxation
Under the Exempt-Exempt-Exempt or EEE scheme, earnings, gains as well as withdrawals are tax-free*. It is a popular tax-saving scheme that helps in long-term financial planning.
Taxes act as fuel for government funding. They are crucial for supporting necessary public services, such as education and healthcare. While paying taxes is the responsibility of every eligible citizen within a country, high taxation can lead to a financial burden on some taxpayers. At this point, concepts like EEE come into play.
Exempt-Exempt-Exempt, or EEE, is an important concept in the taxation system that allows individuals to build wealth and save tax while complying with the regulations. Under this scheme, all investments, earnings and withdrawals remain tax-free.
Simply put, you can grow your savings and earn interest on them without worrying about paying anything to the tax authorities under the EEE scheme of Section 80C.
Let us discuss more about the EEE scheme, including EEE tax regime investment products, in detail.
**What is EEE in Income Tax?**
Exempt-Exempt-Exempt is a tax-exemption scheme that correlates with the deductions under Section 80C of the Income Tax Act. Certain tax-saving instruments can be utilised under this scheme to save tax on investments, interests, and maturity.
***Exempt Investment:*** The initial investment you make towards an EEE-qualified instrument is itself exempt from income tax. This means a portion of your salary saved in these schemes escapes tax deductions, reducing your taxable income. Think of it as putting your money to work without losing a chunk to the taxman!
***Exempt Interest:*** The interest earned on your investment within the EEE scheme also enjoys tax exemption. As your money grows with compounded interest, the accrued gains remain untouched by the tax net. This allows your nest egg to flourish tax-free, accelerating your wealth accumulation.
***Exempt Maturity Proceeds:*** The cherry on top? The final payout – the maturity proceeds you receive upon completion of the investment tenure – is also exempt from income tax. You reap the full rewards of your investment, principal and interest combined, without facing any tax liability.
**Top EEE Investment Options to Consider**
***PPF***
Perhaps the safest and most popular tax-saving scheme that has benefited individuals for decades is the PPF. It is still a highly sought-after investment option among taxpayers due to its risk-free nature.
Backed up by the Central Government, it offers an opportunity to earn tax-free returns. You can open a PPF account in the bank or any local post office or nearest bank.
Note that this scheme has a 15-year initial lock-in period. Once the plan reaches maturity after 15 years, you can extend the tenure in a block of five years. Under Section 80C, PPF offers tax deductions up to ₹1,50,000 per annum but limitation is on the withdrawals.
***Unit Linked Insurance Plans (ULIPs)***
ULIPs**, or Unit Linked Insurance Plans, are known for offering a variety of investment features and benefits. Some of the most attractive features of ULIPs include automatic portfolio management, goal safety, and multi-fund allocation.
In general, most ULIPs offer around 5 to 9 fund options with different asset and equity allocations. Further, they usually come with a lock-in period of five years, but you can extend it up to 20 years, depending on your preferences. Besides Section 80C deductions, ULIPs also offer exemptions on death benefits under Section 10(10 D). Here, the catch is that maximum about invested in ULIP can not exceed 2.5 Lakhs per annum.
***Equity Linked Savings Scheme (ELSS)***
It is another EEE investment option that can be used for saving tax. Note that it allows you to enjoy tax-free capital gains up to ₹1,00,000. However, as your gains exceed ₹1,25,000, you will have to deal with long-term capital gains tax (LTCG) at the rate of 12.5%.
***Sukanya Samriddhi Yojna (SSY)***
Sukanya Samriddhi Yojna was introduced as a part of the “Beti Bachao Beti Padhao” initiative of the government. It aims at assisting the guardian of a female child to raise funds for her future. You can have an SSY account in the name of your girl child, offering an annual interest rate of 7.6%. Note that the maturity amount and the interest earned are tax-free under this scheme.
***Employee Provident Fund (EPF)***
Finally, EPF, or simply PF, is a retirement program that falls under the EEE scheme. In this option, employers and employees are eligible for interest and are not subject to tax implementations under certain conditions. If you withdraw your EPF amount after its maturity, all your contributions, interests and withdrawals remain tax-free.
**Final Thoughts**
Exempt-Exempt-Exempt (EEE) has become a popular tax-saving option among taxpayers. Investing in products under the EEE scheme helps you maximise your earnings and gains while minimising your tax liabilities.
In this blog, we have discussed the top EEE investment options to choose from. Now, it is your turn to make the right choice considering your financial situation, annual income, long-term financial goals, and other deductions under Section 80C.
Our take is to go with ULIP as it gives following benefits:
1. Option to invest in Equity Market/Debt funds where scope of returns is more than tradtional investments. Funds can be choosen basis the risk appetite.
2. Switchs between Equity/Debt funds allowed without paying LTCG which is 12.5% on returns earned or STCG which is @ 20.00%.
3. Flexibility to withdraw full amount after 5 years completion and fulfill your all medium term needs.
4. No hassles of Tax Harvesting as returns are tax free if if annual investment was made not more than 2.5 Lakh per annum.
We hope it helps!
Regards,
GYC by Dinesh Aneja
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Category
Taxation
The Union Budget 2025 had surprisingly pleasant news for the Indian taxpayers and Investors. More so for the so-called and often-ignored Middle Class of India. And what exactly is the good news?
The Indian Taxpayers opting for New Tax Regime and earning less than Rs 12 lakh will have to pay No Taxes.
**So going forward, there would be Zero (or NIL) tax for those with income of up to Rs 12 lakh in a year under the New Tax Regime & Slabs!**
Let’s see how this works given that even in the new tax regime, the tax slabs start from Rs 4 lakh. So many are getting confused as to how the Rs 12 lakh income becomes tax-free when slabs start at a lower income threshold.
It is here that Tax Rebate Under Section 87A comes into the picture.
Here is a simple example to show the working:
**How Income Tax is Zero (NIL) on Rs 12 lakh income under New Regime (2025)?**
Suppose, your net taxable income is Rs 12 lakh.
As per the latest new tax slabs, the calculated normal tax liability is as follows:
0 to Rs 4 lakh – 0% – Nil
Rs 4 lakh to Rs 8 lakh – 5% of Rs 4 lakh – Rs 20,000
Rs 8 lakh to Rs 12 lakh – 10% of Rs 4 lakh – Rs 40,000
So the total tax = 0 + Rs 20,000 + Rs 40,000 = Rs 60,000
But, the revised Section 87A limit now offers a full rebate for taxable income of up to Rs 12 lakh under the new tax regime. Earlier, eligibility for tax rebate under Section 87A was Rs 7 lakh. Now it has been enhanced in Budget 2025 to Rs 12 lakh.
Result?
Tax of Rs 60,000 – Rebate of Rs 60,000 = Zero Tax
So you can say that the so-called zero tax is applicable only for those whose taxable income is Rs 12 lakh or less under the new tax regime.
But what happens in case taxable income is more than Rs 12 lakh?
Let’s see…
**Income Tax on income above Rs 12 lakh in New Tax Regime (2025)**
If you wish to calculate income tax on your net taxable income above Rs 12 lakh, then let’s take an example to understand it.
Suppose, your total income is Rs 14 lakh.
As per the tax slabs, the calculated normal tax liability is as follows:
0 to Rs 4 lakh – 0% – Nil
Rs 4 lakh to Rs 8 lakh – 5% of Rs 4 lakh – Rs 20,000
Rs 8 lakh to Rs 12 lakh – 10% of Rs 4 lakh – Rs 40,000
Rs 12 lakh to Rs 14 lakh – 15% of Rs 2 lakh – Rs 30,000
The total income tax in this case would be = 0 + Rs 20,000 + Rs 40,000 + Rs 30,000 = Rs 90,000
You may ask why aren’t you getting the Rebate under Section 87A in this case.
This is because the revised Section 87A limit is applicable for the new regime only for those who earn less than Rs 12 lakh. And in our example, that limit is crossed as the income is more than Rs 12 lakh.
Since your taxable income is Rs 14 lakh, which is not less than Rs 12 lakh in the new regime, you are not eligible for the rebate under Section 87A of the Income Tax Act.
So your tax liability remains at Rs 90,000 and you have to pay the full amount. Sorry! But you can still be wise about tax planning by **giving priority to your investment planning.**
It makes sense to repeat that the Section 87A Rebate in the new regime is available only if taxable income is Rs 12 lakh or less. Not if it’s above it.
**A few more aspects to remember:**
This increased Rs 12 lakh threshold is for total TAXABLE income, i.e. after considering all deductions that are applicable under the new regime like standard deduction (Rs 75,000), etc. So, if you are a salaried individual, and you get a standard deduction of Rs 75,000, then in your case, a total income of up to Rs 12.75 lakh will be tax-free!
The Rebate under Section 87A is not available for Capital gains. So you can’t adjust it against your taxes on capital gains. Let’s say you earn Rs 6 lakh from salary income and you have another Rs 3 lakh in capital gains. Then even though total earnings are Rs 9 lakh which is less than Rs 12 lakh, the rebate of Section 87A is not applicable on capital gains and hence, you will have to pay capital gains tax on the Rs 3 lakh capital gains (though salary of Rs 6 lakh remains tax-free).
I hope this article clarifies your doubts about how the income of Rs 12 lakh is tax-free under the new tax regime and what is the zero per cent (0%) income tax slab for those earning less than Rs 12 lakh.
**That said, let me remind (and caution) you that while the income of Rs 12 lakh is now tax-free, and hence, there is no theoretical need to save tax, let this not deter you from saving/investing. Paying no tax is good. But you still have to save for the future. Earlier, there was a tax-linked incentive to do so for many. Now, it is up to you.**
Regards,
GYC by Dinesh Aneja
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Category
Taxation
**Tinkering with the horizon**
When an investment allows to claim deduction from your taxable income under some section, then it often comes with some lock-in period. In other words, you have to sacrifice liquidity for availing the tax benefits. This can be problematic. If you may need money in short-term, then locking-in majority of your investment will make you feel helpless and force you to take desperate measures. Or, if your financial goal may require money sooner or later than the pre-decided timeline – then you will be stuck with your locked-in investments.
**Ignoring Risk Profile**
If I say capital gains that you made from your equity investment is taxed much lesser or not even taxed at some situations compared to your investment in other asset classes (debt or commodity) – does that mean you ignore your risk profile, goal horizon and invest maximum in equity? You should not.
**Compromising Asset Allocation**
Investing separately in Gold Fund, International Equity Fund or Debt Fund is not that tax efficient. But that does not mean that you ignore your exposure in such funds and instead invest only in multi-asset allocation fund just because that is tax efficient (though that can be a topic on its own for some other day).
**What should be done?**
Give achieving your financial goal the topmost priority. Check your risk profile, consider your surplus, find out how much return you should earn – choose your asset class and investment product accordingly. If features of a tax saving product get perfectly aligned with your goal and risk-return profile – then of course go ahead and make that part of your portfolio. Otherwise not.
If your decision of making investment or choosing insurance policies has often been taken for the sole purpose of saving some tax – then you have reasons to worry. This tendency of jumping on the bandwagon i.e. saying ‘yes’ to a product just because it offers some tax saving can backfire or do harm to your overall portfolio of investments and insurance. Let us see, how.
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Category
Taxation
**SIP – Systematic Investment Plan**
It is a nice, convenient package solution for making repeated additional purchases in a mutual fund scheme. We need to choose a particular date of the month, how long we are going to invest and a fixed amount that should get debited from our bank account and get invested in the chosen scheme.
Through SIP investments, we purchase some units of the scheme in the current NAV i.e. price per unit. Now suppose, you are doing SIP in an ELSS (Equity Linked Saving Scheme). In that case, number of units that you buy in each SIP transaction, will remain locked for 3 years. So, if you do a 12 months’ SIP in an ELSS, you would be able to redeem all the purchased units only after the end of 4 years from the starting date of your SIP.
SIPs can be topped-up i.e. instalment amount can be increased after every 12 months. This is a very powerful and practical feature of SIP investment that not many investors exercise. This way a goal can be achieved with less strain on your pocket at start.
**SWP – Systematic Withdrawal Plan**
It is a nice, convenient **package solution for making repeated withdrawals** / redemption from a mutual fund scheme. We need to choose a particular date of the month, how long we are going to withdraw and a fixed amount that should get credited to our bank account and get redeemed from the chosen scheme. This will go on till the time your fund lasts or the mentioned fixed tenure – whichever is earlier.
Like step-up SIP, step-up or **inflation adjusted withdrawal** through SWP is not that straightforward, but still can be achieved with some minor adjustments and tweaking. But it makes perfect sense, that your withdrawal amount does not remain fixed, and you get to withdraw slightly larger amount after every 12 months to support the increased household and lifestyle expenses for instance.
Very few investors know / understand / realize that the entire withdrawal amount from SWP is not taxed but **only the resultant capital gain part**. Let me explain it. In every withdrawal, you redeem some number of units, say X. Now, these X number of units have some purchase NAV and as well as sale NAV. Your capital gain will thus be calculated as – Number of Units Redeemed * (Sale NAV – Purchase NAV).
**STP – Systematic Transfer Plan**
Suppose you are not feeling that confident in investing a large lump-sum amount of money into an equity scheme at a go. Instead, you want to get it invested within, say, next 6 months’ time in a systematic manner while earning interest on the not-invested money **higher than the savings bank account**. Again, it may happen that you change your mind after 4 months and want to invest the rest amount immediately as you feel that the market has reached its bottom. Such flexibility can only be offered by STP.
To make STP work, you need to park (i.e. invest) your money first **into a liquid scheme of the same mutual fund house** whose equity scheme you have chosen as the final destination of your money. Thereafter based on your given instruction, a fixed amount of money will get invested into that equity scheme from the liquid fund where you have parked your money into, every month in a particular date or at whatever chosen frequency.
STP work best when market keeps on tanking from your date of investment. Thereby, you keep on buying larger sum of units with the same investment amount. Or in other words, if you are **feeling bearish about the market in near term or expecting huge volatility**, then STP could be the right choice. Otherwise not.
An informed investor is always a better investor. Systematic Investment Plans (SIP) into mutual fund scheme is now so commonplace that many of us overlooks some of its features or characteristics. Thus, we remain not-so-informed investors after all. Same goes true for its cousins – SWP and STP. Let’s understand some of the not-so-common features of SIP, SWP and STP here. Let the fun ride begin.
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