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loyallogic · 4 years ago

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Tax savings investments in a nutshell

This article is written by Kamala Pulugundla.

Introduction

Given a choice, the majority of us would not like to pay tax on the income we earn. However, it is essential that we pay tax. As citizens of India, we are also consumers of the public infrastructure and facilities. Thus, it is our responsibility and duty to contribute towards its development and maintenance. This contribution can be made by duly paying the taxes on income to the government, after availing the benefits under the Income Tax Act, 1961 in the form of exemptions and deductions, as income tax is the major source of government revenue.

The best time to plan investments, is the beginning of the financial year, which commences from April. This is because it will help you take planned and informed decisions rather than in a hurry. Early investments help you to earn compounded returns and help achieve long term goals.

Following is a summary of tax saving investments for ready reference. It shall then be followed by a detailed analysis.

Summary:

Section / serial no

Particulars

Benefits

limitations

80C

1.1

Life Insurance Premium

Maturity proceeds tax tax-free u/s 10(10D) subject to conditions

Maximum deduction Rs. 150000

1.2

Public Provident Fund

Low risk and guaranteed returns

Interest accrued exempt u/s 10(11)

Maturity proceeds exempt u/s 10(11)

Maximum deduction Rs. 150000

Mandatory lock in period – 15 years

1.3

National Saving Certificate (NSC)

Interest received – deduction allowed u/s 80C

Can avail secured loans against NSC

Maximum deduction Rs. 150000

1.4

Statutory Provident fund (SPF)/ Recognized Provident fund (RPF)

Interest on RPF exempt up to 9.5%

SPF Interest fully exempt

1.5

Fixed deposits (FD) for a period of 5 years or more

Guaranteed returns

Handsome interest depending on investment period

Avail loans against FD

1.6

Notified bonds of NABARD

Tax free bonds. Thus no tax and TDS

Secured, since backed by Government of India

1.7

Senior citizens saving scheme (SCSS)

Low risk, fixed income

Maximum investment Rs. 15,00,000

Eligibility – individuals above the age of 60 years or retired at the age of 55 or later or under VRS

Tenure – 5 years + 3 years

Max deduction u/s 80C 1,50000

1.8

Unit Linked Insurance Plan (ULIP)

Maturity proceeds exempt u/s 10D. no long term capital gain

Maximum deduction Rs. 150000

1.9

Housing loan

Deduction in respect of principal amount repaid

1.10

Notified units of Mutual fund and ELSS

Consistent and regular returns subject to market risk.

Maximum deduction Rs. 150000

Lock in period of 3 years

80CCC

Contribution to Pension fund of LIC or other insurance company

Premium paid qualifies deduction

Death benefit paid exempt u/s 10(20D)

Commuted pension received is exempt

Maximum deduction Rs. 150000

3.80CCD

Contribution to Pension Scheme of Central Government/ New Pension Scheme (NPS)

Contribution qualifies for deduction maximum of Rs 1,50,000

Additional deduction of Rs. 50,000 granted u/s 80CCD(1)

Employers Contribution can be claimed as deduction U/s 80CCD(2)

80CCE

Deduction u/s 80C + 80CCC + 80CCD(1) restricted to Rs. 1,50,000

80D

Medical Insurance Premium

Forced savings for securing health and saving tax

Detailed analysis

Specific Investments: Section 80C

Eligible Assessee: Individual and HUF

Aggregate maximum deduction that can be claimed for Investments u/s 80C: Rs. 1,50,000/-

Investments u/s 80C:

Life Insurance Premium (LIP):

Individual: can claim deduction for LIP paid for self, spouse and children. No deduction can be claimed in respect of LIP paid for parents.

Maximum premium that can be claimed as deduction:

If Policy issued before 01/04/2012:

If Policy issued after 01/04/2012:

If Policy issued after 01/04/2013 for a person with disability specified u/s 80U:

Lower of:

Premium paid

20% of sum assured

10% of sum assured

15% of sum assured

Example:

Premium paid: Rs. 20,000

Sum Assured: Rs. 1,35,000

Deduction Allowed will be as under:

If Policy issued before 01/04/2012:

If Policy issued after 01/04/2012:

If Policy issued after 01/04/2013 for a person with disability specified u/s 80U:

Lower of:

Premium paid: 20,000

20% of sum assured: 1,35,000*20% = 27,000

10% of sum assured: 13,500

15% of sum assured: 20,250

Deduction allowed: 20,000

Deduction allowed: 13,500

Deduction allowed: 20,000

(If the Policy was taken on after 01/04/2012 but before 01/04/2013, then maximum deduction allowed shall be 10% of sum assured i.e. 13,500.

Benefits

Deduction u/s 80C as specified above from the gross total income

U/s 10(10D) the proceeds on maturity are Tax-free subject to certain conditions:

Conditions u/s 10(10D):

If the premium paid is within the above limits, then the proceeds on maturity are completely tax free.

If the premium paid exceeds the above limits, then taxability would be as under:

Receipts before 01/09/2019

Receipts after 01/09/2019

Entire sum assured taxable

TDS applicable u/s 194DA: 1% on sum assured i.e. proceeds on maturity

Amount taxable:

Maturity proceeds less premium paid

TDS applicable u/s 194DA: 5% on Maturity proceeds less premium paid

Note: No TDS of proceeds on maturity is less than Rs. 1,00,000.

Amount deposited in Public Provident Fund (PPF)

(Contribution made in respect of resident assessee, spouse and children. Thus NRIs are not eligible to open a PPF account. However, existing accounts on their name can continue.)

Benefits:

Deposits in PPF account qualify for deduction u/s 80C

Low Risk and guaranteed returns as this plan is mandated by the government.

The annual contribution starts as low as Rs. 5,00 with a maximum cap on annual contribution of Rs.1,50,000.

Benefit of availing loans against the investment amount.

Note:

Loan can be availed any time between 3rd and 6th year from the date of activation of the PPF account.

The maximum amount that can be availed as loan is 25% of the amount available in the PPF account.

The maximum period of loan availed as above is 3 years or 36 months.

Total interest accrued on investment in PPF is also exempt u/s 10(11).

Entire proceeds received on maturity also exempt u/s 10(11)

A further extension of 5 years is available after maturity.

Investment in PPF can be made in installments as well. A maximum of 12 installments is allowed in a year.

Limitations:

Mandatory lock in period of 15 years is imposed on the principal amount i.e. amount deposited. However, partial withdrawal is allowed in case of emergencies. Such a withdrawal can however be made only after 5 years of the activation of the PPF account. 50% of the total balance can be withdrawn in a single transaction permitted in a financial year.

Funds cannot be liquidated before the maturity.

Investment in National Saving Certificate (NSC)

NSC is an Indian Government Savings bond, primarily for small savings and low risk appetite investors. It is a popular Income Tax saving instrument in India.

Term: 5 – 10 years

Benefits:

Qualify for deduction u/s 80C

Interest received thereon on such Investment also allowed as deduction u/s 80C as the same gets accrued and reinvested, except in the year of maturity

Can be used to avail secured loans.

Maximum Limit: Rs. 1,50,000

Taxability:

Interest income accrued needs to be disclosed in the Income Tax Return and claimed as deduction every year except in the year of maturity. In the year of maturity, the interest income is taxable under the head Income from Other Sources.

Contribution towards Statutory provident fund (SPF), Recognized provident fund (RPF)

Benefits:

Deduction u/s 80C

You can transfer your old pension fund account to your new employer

Interest on RPF is exempt upto 9.5%. Interest exceeding 9.5% will be added to the employee’s salary.

Interest from SPF: fully exempt

Taxability:

Proceeds on termination of service or withdrawal is tax free provided, one has been in continuous service for not less than 5 years u/s 1(11) and 10(12). Service rendered to the previous employer is also considered. Benefit of exemption is also available if the continuous service is less than 5 years due to reasons beyond the control of the employee (illness, discontinuance of employer’s business, etc.)

If the above condition is not satisfied, then the amount of proceeds are taxable.

Applicability of TDS u/s 192A if proceeds are not exempt: 10% (TDS not applicable if proceeds are less than Rs. 50,000.

Fixed Deposits (FDs) in a Scheduled bank or Post office for 5 years or more

Benefits:

Deduction u/s 80C of the investment amount

Non-volatile investment with guaranteed return

Considerable interest rates

Limitation

Premature withdrawal not allowed

Loan cannot be availed against these tax saver FD’s

Taxability:

Interest earned on these FDs is taxable under the head income from other sources.

Applicability of TDS: 10% –

In case aggregate interest on FDs from a single bank exceeds Rs. 40,000 (w.e.f 011/0402019. Earlier the limit was Rs. 10,000)

In case of senior citizens, the above limit is Rs. 50,000

Deposits in notified bonds of NABARD

Benefits:

Deduction of investment amount u/s 80C.

NABARD issues tax free bonds thus there is no Tax and consequently no TDS under the Income Tax Act, 1961.

These bonds are backed by Government of India.

These bonds are mostly AAA or AA rated by CRISIL and are thus highly secure.

Considerable annual coupon rate/ interest and such interest is tax free.

NABARD tax-free bonds are proposed to be listed on stock exchange. Thus, the investor has the option to sell in the secondary market, if he wishes to exit.

Taxability:

NABARD also issues zero- Coupon Bonds. That is no interest/ coupon will be payable during the life of the bond. Such bonds are issued at deep discount and generally redeemed at par or face value. On maturity, the difference between the maturity value and issue price is treated as capital appreciation. If the holding period is more than one year, it shall be a long term capital gain at the rate of 10% without indexation benefit and 20% with indexation benefit as per section 112 of the Income Tax Act, 1961. This generates considerable tax efficiency as against other non-interest paying bonds or zero coupon bonds, where the differential amount is treated as interest instead of capital appreciation, and hence taxed under Income from other sources and taxed at regular slab rates along with other income.

Deposit in Senior Citizen Saving Scheme (SCSS)

Eligibility:

Individuals above the age of 60 years.

Individuals who retired at the age of 55 years or later but before 60 years under superannuation or Voluntary retirement Scheme.

Retired defense personnel on satisfaction of certain terms and conditions.

Not eligible – NRIs, Person of Indian Origin, any member of a HUF

Benefits:

Low risk, fixed income investment, interest being paid quarterly

Moderate return. Current interest rate is 7.4%

It is similar to FDs but unlike FDs it is a government backed security and hence more secure.

Investment in this account can be made of an amount as low as Rs. 1,000, maximum investment cap being Rs. 15,00,000.

SCSS accounts can be held either individually or jointly with a spouse.

Premature termination is possible. However, it attracts a penalty of 1% – 1.5% of the deposit amount. No penalty will be charged if the investor is deceased before maturity.

Tenure of Deposit: 5 years with a further extension of 3 years

Taxability:

Interest Income which is credited to savings account of the same bank linked to it, shall be subject to tax at regular slab rates. TDS at the rate of 10% u/s 194A applicable if the total interest in a fiscal year exceeds Rs. 50,000.

Maximum deduction u/s 80C: Rs. 1,50,000.

Contribution to Unit Linked Insurance Plan (ULIP)

ULIP is a plan in which the policyholders pay either an annual or monthly premium. A small amount of this premium goes towards securing the life of the investor, and the balance amount is put into investments in stock, bonds, and mutual funds. Thus, it acts as both life insurance cover, as well as an investment plan. However, investments made are subject to capital market risks.

Benefits:

Deduction u/s 80C of the premium amount paid.

Dual benefit of protection and Investment.

ULIPs offer a range of high, medium and low risk investment options for varied risk appetite investors.

Maturity proceeds are exempt u/s 10D. Thus, there is no Long term capital gain tax.

Allows you to switch between fund options with no additional charges up to 12 switches in a year.

Partial withdrawal allowed in case of unforeseen future events.

Benefit of market linked growth without actually participating in the stock market.

Availability of top-up facility. Thus, an investor can voluntarily invest an amount over and above the premium amount, when the ULIP is performing well.

Maximum deduction u/s 80C: Rs. 1,50,000.

1.9. Housing Loan

Benefits:

Deduction in respect of interest paid on housing loan is available u/s 24 with a cap of Rs. 2,00,000 if the property is self-occupied. There is no limit on deduction under this section if the property is let-out.

Deduction in respect of Principal amount is available u/s 80C.

1.10. Notified units of Mutual fund

Benefits:

Deduction /us 80C of the amount invested, maximum cap being Rs.1,50,000.

Consistent and regular returns.

Offers varied types of investment plans to suit investor needs and long term goals.

Taxability:

Taxation of Dividend:

Up to financial year 2020-2021

From financial year 2020-2021

Concerned mutual fund was subject to Dividend Distribution Tax (DDT) u/s 115R

Mutual funds no longer liable to deduct DDT u/s 115R

Income received was exempt in the hands of investor u/s 10(35)

Dividend Income taxable at regular tax rates. TDS provisions are also applicable.

1J. Notified Pension Scheme of UTI or Mutual Fund

NOTE: aggregate amount of deduction /s 80C in respect of all the above schemes shall not exceed Rs. 1,50,000.

Contribution to Pension fund of LIC or other insurance company u/s 80CCC

Eligible assessee: Individual

Maximum amount of Deduction u/s 80CCC: Rs. 1,50,000

Benefits

Premium paid qualifies for deduction u/s 80CCC subject to maximum of Rs. 1,50,000

Death benefit paid under LIC Pension Plan is exempt u/s 10(10D)

Commuted pension received from such funds is exempt. Whereas, uncommuted pension received is taxable

Contribution to Pension Scheme of Central Government / new Pension Scheme (NPS): section 80CCD

Eligible Assessee: Individual

Amount of deduction:

80CCD(1)

Salaried employees

Other Individuals

Lower of:

Employees contribution

Assessee’s contribution

10% of salary (Basic + DA)

20% of Gross Total Income

80CCD(1B): Additional deduction of Rs. 50,000 shall be allowed other than contributions covered u/s 80CCD(1)

80CCD(2): Employers contribution to NPS for the benefit of the employee:

Employers contribution is first taxed as salaries and thereafter allowed as deduction u/s 80CCD(2)

Deduction:

Lower of –

Employer’s contribution

10% salary (Basic + DA)

80CCE: Aggregate deduction /s 80C + 80CCC + 80CCD(1) is restricted to a maximum of Rs. 1,50,000

Tax planning advice: Since 80CCD(1B) is not covered under 80CCE limit, it is advisable to first exhaust Rs. 50,000 deduction available u/s 80CCD(1B) and the balance u/s 80CCD(1).

Section 80D: Deduction in respect of medical Insurance Premium, central government health scheme, preventive health check-up and medical treatment

Eligible assessee: Individual & HUF

Deduction in respect of premium paid for:

In case of individual: self, spouse, dependent children and parents

In case of HUF: Any member of HUF

Amount of Deduction:

Particulars

Individual

HUF

Self, spouse, dependent children

parents

Members

Medical insurance premium

Yes

Central Government health scheme

Yes

Preventive health check-up

yes

General deduction i +ii + iii

Max Rs. 25000

Max rs. 25000

Additional deduction when policy taken on life of senior citizen

Max 25000

B. Medical Expenditure of senior citizen and mediclaim premium not paid for such person

Max deduction: 50,000

Maximum deduction (A+B)

Max deduction: 50,000

Benefits

Acts as both forced savings for securing health and savings in tax.

Important pointers to be kept in mind while planning investments:

Check for existing tax-saving expenses like LIC Premiums, children’s tuition fees, Home loan repayment, etc.

Deduct the above amount from Rs. 1,50,000 to arrive at balance investment to be made, if the aggregate of the expenses in pt.1 is below Rs. 1,50,000

Choose appropriate tax-saving investments based on your risk-taking capability and short-term and long term fund requirements and goals.

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sunshineweb · 4 years ago

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RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS

RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS which is the best option for senior citizens? Replacing the 7.75% Government of India Savings Bonds, Government announced the Floating Rate Savings Bonds, 2020 (Taxable).

What are Floating Rate Savings Bonds?

Usually, when you invest in Bonds, the coupon (interest) what you get is fixed throughout the period. However, in the case of floating rate bonds, the interest is not fixed and it changes as per the specified bond feature.

Hence, such bonds are sensitive to interest rate fluctuation. It is not like your typical Bank FD, where you know well in advance the interest rate payable by banks for the full FD tenure.

The term of the bond is fixed. However, if you are not interested to retain the bonds, then you can sell it in the secondary market at the prevailing price of the bond if such bonds are eligible to trade.

RBI Floating Rate Savings Bond, 2020 (Taxable) Features and Eligibility

In addition to above features, let me share certain important features of this bond.

# If holder of the bond turned NRI, then he can hold the bond up to maturity.

# The Bonds will be issued only in the electronic form and held at the credit of the holder in an account called Bond Ledger Account (BLA), opened with the Receiving Office.

# The interest on the bonds will be payable half-yearly from the date of the issue of the bond. Once on 30th June and another on 31st December yearly. As I mentioned above, there is no option of cumulate in this bond.

# The interest will change on a half-yearly basis starting from 1st January 2021. This interest rate is linked to the prevailing interest rate of NSC (Post Office National Savings Certificate)+35 BPS (100 BPS=Rs.1). Hence, the coupon rate of Floating Rate Savings Bonds, 2020 (Taxable) for the period of 1st July 2020 to 31st December 2020 is fixed at 7.15%. Because the current NSC interest rate is 6.8%+0.35%=7.15%.

# Interest will be payable directly to the bond holder’s account.

# The bonds will repayable after the completion of 7 years. Premature withdrawal is allowed only for those whose age is 60 years and above subject to the submission of document relating to the date of birth proof. The minimum lock-in period for the age group 60 Yrs to 70 Yrs is 6 years. For 70 Yrs to 80 Yrs is 5 Yrs and for those whose age is beyond 80 years is 4 years.

# Even though you request for redemption as per your age slab, the redemption amount will be transferred with immediate next interest rate period. Hence, irrespective of your submission for premature withdrawal, Govt will process it either on 1st July or 1st January every year. Also, in such premature closure, Govt will deduct 50% of the last coupon payment.

I have written a detailed post about RBI Floating Rate Savings Bonds, You can refer the same for more details.

Features of Pradhan Mantri Vaya Vandana Yojana (PMVVY)

Let us now discuss about the features and eligibility of Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020- 2023.

Some other features of this product are as below:-

# You can surrender this policy during the policy period under certain exceptional circumstances like pensioner requires money for treatment of any critical/terminal illness of self or spouse. Surrender value payable will be 98% of the purchase price.

# You can avail the loan facility after completion of 3 policy years. The maximum loan payable will be 75% of the purchase price. Interest on the loan will be recovered from the pension amount.

# Pension is payable at the end of each period, during the policy term of 10 years, as per the frequency of monthly/ quarterly/ half-yearly/ yearly as chosen by the pensioner at the time of purchase.

# Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme does not provide tax deduction benefit under section 80C of the Income Tax Act. Returns from this scheme will be taxed as per existing tax laws.

# There is no TDS on this product.

# During the policy period, the pensioner will receive the monthly, quarterly, half-yearly, or yearly pension as he has opted during the time of buying. On the death of the pensioner during the policy term, the Purchase Price will be refunded to the nominee (or legal heirs in the absence of nominee). If the pensioner survives up to the end of the policy term, Purchase Price and final installment of the pension will be paid to the pensioner.

# You can buy this through LIC (either online or offline).

Read a complete detailed post “Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020 – 2023 – 5 Changes you must know“.

Features of Senior Citizen Savings Scheme (SCSS)

# Anyone who attained the age of 60 years or above can invest in this product.

# NRIs and HUF are not allowed to invest.

# You can open Senior Citizen Savings Scheme either in the post office or with recognized 24 PSU banks and one private bank.

# Minimum investment is Rs.1,000 and maximum is Rs.15,00,000.

# The current interest rate is 7.4% and will change on quarterly basis.

# Interest will be payable on quarterly basis.

# Premature withdrawal is allowed but with certain conditions. In case the account is closed after the expiry of 1 year but before the expiry of 2 years from the date of opening of the account, an amount 1.5% of the deposit shall be deducted and the balance paid to the depositor. In case the account is closed on or after the expiry of 2 years from the date of opening of the account, an amount equal to 1% of the deposit shall be deducted and balance paid to the depositor.

# Account will not be extended automatically.

# You can extend for a period of 3 years after 5 years maturity period. However, you have to submit Form B within one year from the date of maturity.

# Also, such extended accounts can be closed after one year of extension without any penalty. Means after completion of 6th year, one can withdraw the amount without any penalty.

# Interest rate during such extension period will be as per prevailing rate of interest after 5 years maturity.

# Only one extension is allowed to the old account. Means after 5 years completion of SCSS, you can extend only for once. After that, the account will be matured.

# However, you are free to open one more account during the old account tenure or after maturity of old account subject to the maximum ceiling of Rs.15 lakh.

# Loan is not available.

# One can avail up to Rs.1,50,000 as a maximum benefit under Sec.80C by investing in SCSS scheme.

# Interest Income-Interest income is treated as taxable income. Hence, there is no tax benefits. It will be taxed as per your tax slab. TDS can be deducted on interest earned if it exceeds the minimum limit prescribed by the Government.

Read the complete post about SCSS at “Post Office Senior Citizen Scheme (SCSS)-Benefits and Interest Rate“.

RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS – Which is the best?

Let us understand which is the best among RBI Floating Rate Savings Bonds Vs PMVVY Vs SCSS. I will try to compare all these products with respect to the features for your benefit.

# Tenure

RBI Floating Rate Savings Bond offers you 7 years. PMVVY is for 10 years and SCSS is for 5 years.

# Minimum and maximum investment

In case of RBI Floating Rate Savings Bonds, the minimum investment is Rs.1,000 and there is no maximum limit. However, in the case of PMVVY, the minimum investment is Rs.1,56,658 for a yearly pension of Rs.12,000 and maximum investment is Rs.15,00,000. In case of SCSS, the minimum amount is Rs.1,00,000 and the maximum is Rs.15,00,000.

# Interest rates

In the case of RBI Floating Rate Savings Bonds, the current coupon up to 31st December 2020 is 7.15%. However, as I pointed above, it will change twice in a year. Once in 1st July and another time on 1st January. Hence, you can’t expect a fixed interest on this bond. However, in the case of PMVVY and SCSS the current interest rates are 7.4%.

# Frequency of interest rate payment

In case of RBI Floating Rate Savings Bonds, the interest payment is a half-yearly basis. However, in case of PMVVY it is monthly, quarterly, half-yearly, or yearly. In case of SCSS, it is on a quarterly basis.

In case of RBI Floating Rate Savings Bonds, the interest rate will change once in 6 months. Once on 1st January and second time on 1st July every year.

In case of PMVVY, the interest will be revised on yearly basis. For SCSS, it is on quarterly basis.

However, if you invested in PMVVY and SCSS now, then the same interest rate will be applicable for you throughout the end. Even though the interest rate on PMVVY and SCSS change on a yearly and quarterly basis respectively, it is for NEW INVESTORS but not for the existing investors.

# Minimum Age

There is no such mention of a minimum age limit in RBI Floating Rate Bonds. However, in case of PMVVY and SCSS, the minimum age limit is 60 years.

# Liquidity

In case of RBI Floating Rate Bond, premature withdrawal is allowed only for those whose age is 60 years and above subject to the submission of document relating to the date of birth proof. The minimum lock-in period for the age group 60 Yrs to 70 Yrs is 6 years. For 70 Yrs to 80 Yrs is 5 Yrs and for those whose age is beyond 80 years is 4 years.

The Bonds are not allowed to transfer, trade or eligible for collateral.

In case of PMVVY, you can surrender this policy during the policy period under certain exceptional circumstances like pensioner requires money for treatment of any critical/terminal illness of self or spouse. Surrender value payable will be 98% of the purchase price.

In case of SCSS, in case the account is closed after the expiry of 1 year but before the expiry of 2 years from the date of opening of the account, an amount 1.5% of the deposit shall be deducted and the balance paid to the depositor. In case the account is closed on or after the expiry of 2 years from the date of opening of the account, an amount equal to 1% of the deposit shall be deducted and balance paid to the depositor.

# Loan facility

In case of RBI Floating Rate Bond, it is not eligible as collateral for availing loans from banks, financial Institutions and Non-Banking Financial Companies.

In case of PMVVY, you can avail the loan facility after completion of 3 policy years. The maximum loan payable will be 75% of the purchase price. Interest on the loan will be recovered from the pension amount.

In case of SCSS, you are not allowed to avail the loan by pledging it. Because this scheme is meant for regular income from your investment.

# Tax Benefits while investing and the returns

Let us discuss the tax benefits of RBI Floating Rate Bond Vs PMVVY Vs SCSS during an investment and the tax treatment of interest income.

Tax Benefits during investment

In the case of RBI Floating Rate Bond and PMVVY, there are no tax benefits. However, in the case of SCSS, you can avail the tax benefits of up to Rs.1,50,000 under Sec.80C by investing in this product.

Tax Benefits on interest income

In RBI Floating Rate Bond, Interest on the Bonds will be taxable under the Income Tax Act, 1961 as applicable according to the relevant tax status of the Bondholders. The interest payment is subject to TDS laws.

In case of PMVVY and SCSS, returns from these scheme will be taxed as per existing tax laws.

# TDS Facility

In case of RBI Floating Rate Bonds, tax will be deducted at source while making payment of interest. However, by submitting the Form 15G/H, you can avoid the TDS.

In case of PMVVY, there is no TDS. But in case of SCSS, TDS can be deducted on interest earned if it exceeds the minimum limit prescribed by the Government.

How to buy?

You can buy RBI Floating Rate Bonds from designated Banks.

You can buy PMVVY through LIC (either online or offline). However, in the case of SCSS, you can open the Senior Citizen Savings Scheme either in the post office or with recognized 24 PSU banks and one private bank.

Conclusion:-There is nothing called the best. However, with comparison to RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS, you can easily decide which is the best for your requirement. All three products are SAFE. Hence, choose the products based on your actual requirements.

Refer our latest posts:-

Top 5 Super Top-up Health Insurance Plans in India 2020

RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS

Latest Post Office Interest Rates July-Sept 2020

Covid Standard Health Policy or Corona Kavach Policy – Features and Benefits

Government of India Floating Rate Savings Bonds, 2020 (Taxable) – Should you invest?

How to create ONE CRORE Rupees from EPF?

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bloggermotion-blog · 5 years ago

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TAXABILITY OF LIFE INSURANCE MATURITY AMOUNT- BUDGET 2019

Most of us think that the Taxability of Life Insurance Maturity Amount is tax-free. But many of us are unaware that the Government has newly introduced the TDS on Life Insurance Maturity Amount. Further, it is increased in the Budget 2019.

Hence, let us understand the applicable TDS on Life Insurance Maturity Amount.

Before understanding the TDS concept, let us first understand the taxation on Life Insurance Policies.

Must Read –

TERM LIFE INSURANCE COMPANIES CHOOSE BEST PLAN ONLINE

Here are the sections to know the Taxability of Life Insurance Maturity Amount

1) Section 80C of Income Tax Act

We all very well know that whatever premium you pay towards life insurance can be shown under Sec 80C. But there are some conditions to qualify under this section.

If the premium paid towards a life insurance policy on self, spouse or kids and if the policy was issued on or before 31st March 2012, then eligible deduction under Sec 80C is only 20% of the sum assured. (Example I)

If the premium paid towards a life insurance policy on self, spouse or kids and if the policy was issued on or after 1st April 2012, then eligible deduction under Sec 80C is only 10% of the sum assured. (Example II)

2) Sec 80CCC of Income Tax Act

Any premiums paid by taxpayer towards pension schemes like LIC’s New Jeevan Suraksha will be eligible for deduction under this section. Please note below two points here.

This section only deals with the individual taxpayer. Hence the contribution made in the name of spouse or kids is not eligible for taxation.

The aggregate amount of deduction under Sec80C, Sec80CCC and Sec 80CCD (1) shall not exceed Rs.1,50,000.

3) Section 10 (10D) of Income Tax Act

Now it is important to understand Section 10 (10D) of the Income Tax Act.

If you purchased the policy on or before March 31, 2003, then such maturity from these policies will be TAX-FREE.

If you purchased the policy after 1st April 2003 to 31st March 2012, and premium paid towards such policy on self, spouse and kids are less than 20% of sum assured, then such maturity amount is TAX-FREE.

Next, if you purchased the policy on or after 1st April 2012, and premium paid towards such policy on self, spouse and kids are less than 10% of sum assured, then such maturity amount is TAX-FREE.

Death Claim amount one receives from Life Insurance is completely TAX-FREE.

Any Sum received under Keyman Insurance is TAX-FREE.

If the policy is issued on or after 1st April 2013 for those who are disabled or suffering from ailments as specified by the Income Tax Act, where the premium payable in any given year exceeds 15% of the actual sum assured (as per section 80DDB) is TAX-FREE.

If you purchased the policy which is issued on or before March 31, 2003, then such maturity from these policies will be TAX-FREE.

Some Practical Examples on TDS on Life Insurance Maturity Amount

Example I

Let us say Mr.A took a life insurance plan before 31st March 2012 with Sum Assured as Rs.3,00,000.The Policy term being 10 years and yearly premium is Rs.65,000.

But according to the above rule, only 20% of Sum Assured (in this case 20% of Rs.3,00,000 I.e Rs.60,000) is eligible for tax deduction under Sec 80C.

So Mr.A can avail benefit only to Rs.60, 000 not Rs.65, 000.

Example II

Let us say Mr.A took a life insurance plan after 1st April 2012 with Sum Assured as Rs.3,00,000 term being 10 years. The yearly premium was Rs.65,000. But according to the new above rule, only 10% of Sum Assured (in this case 10% of Rs.3,00,000 I.e Rs.30,000) is eligible for tax deduction under Sec 80C. So Mr.A can avail benefit only up to Rs.30, 000 but not whole Rs.65, 000.

Must Read –

INSURANCE TYPES – DIFFERENCES YOU MUST KNOW

Taxability of Life Insurance Maturity Amount- Budget 2019

A few years back Government of India introduced the TDS concept on the Life Insurance Maturity Amount. This TDS rate is now revised in Budget 2019.

In finance bill of Budget 2019, the government said, “It is proposed to amend the said section so as to provide that the levy of tax deduction at source shall be on the income comprised in the sum payable by way of redemption of a life insurance policy, including the sum allocated by way of bonus on such life insurance policy, excluding the amount exempted under the said clause (10D) of section 10 at the increased rate of five per cent.”

Hence, as per this change, there is a change in Income Tax Section 194DA. As per this, the TDS will be applicable to below conditions.

If your maturity amount exceeds more than Rs.1 lakh in a year.

Also, If the policies are not exempt as per the above said Sec.10(10D) of IT Act.

If you do not provide the PAN details with the Life Insurance Companies.

In such a situation, Life Insurance Companies will deduct the TDS. The revised TDS rate after Budget 2019 is as below.

if your maturity amount exceeds more than Rs.1 lakh a year and policies are not exempt as per the above said Sec.10(10D), then there will be a TDS of 5%.

If you do not provide the PAN details with the Life Insurance Companies, then there will be a TDS of 20%.

Must Read –

TOP SECRET TECHNIQUES TO CHOOSE THE INSURANCE POLICY

Note:-

The above said all rules are the same for

Term Life Insurance, Endowment Plans or ULIP Plans.

Maturity, Death Claim or Surrender of the Policies.

#insurance

0 notes

captain-unlikelynutbouquet-blog · 7 years ago

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Collingwood Drivers Insurance?

"Collingwood Drivers Insurance?

I'm currently looking to get provisional driving insurance with this company and was wondering do I also need a full insurance policy alongside the provisional one with this company, Can not find any information about it thanks

BEST ANSWER: Try this site where you can compare quotes: : http://saleinsurancequotes.xyz/index.html?src=tumblr

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I recently passed my driving test, so for a first time driver its going to be high but what if i am an additional driver""

Do I automatically have to get car insurance right after I get my license?

I'm 18, I live with my parents...In order for me to get my license my mom wants me to pay for car insurance (since I'll be under her name) which is understandable, but I don't have a car yet, and I just want my license in case of an emergency...like I won't even be driving around her car rarely. She told me that even if I wanted to get my license and not get car insurance yet, I can't because I live in her house?? Does that sound right? Can't I just get my license without car insurance until I actually have my own car?""

How long after a DMV hearing will your insurance be notified ?

I recently had my DMV hearing am in the process of getting a sr-22 with another insurance company . I am not the primary holder of my current insurance I want to avoid their rate to go up or for them to find out . How many days do I have to cancel my current insurance before they cancel me .?? Please help ?

Does anyone have a Pontiac G6 GTP?? i need to know how much car insurance are on the them?? please let me know

""Florida Auto Insurance Quotes Online, are they really safe?

Florida residents do you really think entering all your valuable personal information online for an auto insurance quote is really the safe way to obtain auto insurance? A local personalized auto insurance agent who you can pick up the phone and call or stop by their office sounds so much safer and personal.

""Car insurance for new driver, help please?""

I'm 18 and I have just passed my test about a week ago, and am looking for insurance etc. But the quotes I'm getting are all about 2,500, which I cannot afford at all as I'm a student. I haven't bought a car yet, as I want to find a good quote first, but the details I have been putting in so far is Vauxhall Corsa 1.0l 3dr age 1999. Surely, this is neither a powerful nor new car, so I don't understand why I'm getting quotes of 2 and a half grand?! I have tried different cars, as well (renault clios, ford fiestas and polos) but it has made little difference. :( I know that the insurance is always going to be high for new young drievrs, but this is really taking the piss, if I'm honest. I have tried about 20-30 different comparison sites and individual company sites, and this is so far the best I'm getting. I've been putting in third party cover and social + pleasure travel or whatever it is. Also, that the car will be parked on a driveway over night. I will be 19 in four months, so is there a chance that insurance will have gone down by then, because it wouldn't be that long to wait. But otherwise, any suggestions, please, are there any details I should change, about the car or the insurance etc. Please help!! :( Thanks in advance""

Is insurance for a motorcycle alot?

I want to get a motorcycle because it is more convenient for me and its looks fun. But I heard insurance is alot? I am 19 I live in California and I have a drivers licensce. I am going to take the motorcycle class that I think is required. Will I get any discounts for any of these factors? Thank you guys

Does anyone know of any good prescription insurance?

We are a low income family who apparently make too much to qualify for any state assistance. I have expensive medicine needed for panic disorder every month and can't afford it. Does anyone know of any prescription plans that are affordable and worth it?

Collingwood Drivers Insurance?

What is the cost of Medical Insurance for an 18 year old?

I am a 17 year old senior in St. Louis, Mo. I plan to move out of my parents house promptly after the school year is over. My boyfriend and I have been doing a lot of research on apartments and creating a budget. My biggest concern though, is medical insurance.. I'm not sure how much it is going to cost us to be able to have it.. I would really appreciate an average monthly fee, (or at least an idea) Thank you!""

Car Insurance / Accident Question?

So both cars are backing out of the parking lot (two sided type in a shopping center) and neither one saw each other and bumped rear ends of each car. We both pretty much made the same mistake, how does insurance usually take care of this?""

Car insurance/medical question.?

I recently got into a car accident..and had to make a recorded statement over the phone to my car insurance company NJ Cure....about the accident..they asked...did you take any prescription medication that day? I said yes I take Lexapro...Nj cure replied...oh we didnt know u were taking prescription meds...I replied...u guys never asked in the renewal policy. My Question is this.....CAN THEY RAISE OR DROP MY INSURANCE COVERAGE SINCE I AM ON MEDICINE PRESCRIBED BY MY DOCTOR???

Car accident/health insurance question?

Hi guys, so here is my situation. someone rear ended me when I was yielding to other cars. The police came and gave her a ticket and he made us exchange information because he said the damage to my car doesnt look like its over $1500(thats the only time they issue a police report. I live in virginia).I hit my head and back pretty bad so I have been experiencing severe back pains and minor headaches. I have been seeing a chiropractor and putting all the bills on my health insurance. I got an email from my health insurance where they sent me a form for me to sign saying i will reimburse them from any settlement for health coverage that I get from the other person's auto insurance company. I havent signed/sent the paper back to them yet. Do I really have to reimburse my health insurance company??? the thing about it is, I am graduate student doing research(phd) so my insurance is fully paid for my the NIH at the beginning of the school year(so i personally dont make any monthly payments from my paycheck or anything). So do I have to reimburse my health insurance(GM southwest) for any health settlement i get from the other person's auto insurance company? I am thinking about getting a lawyer. is it really worth it? someone please help.""

Can I drive another car with my fully comprehensive insurance?

I have fully comprehensive car insurance on a car, I heard you can drive another car with the owners permission because you're insurance is fully comprehensive. (So if there is a crash my insurance will cover the costs 3rd party) Here's the tricky bit, I am on my friends fully comprehensive car insurence as a named driver. Can I (Being a named driver on his fully comprehensive insurence) drive someone else's car with there permission? Thanks in advance""

How much will the Insurance cost me for A 1999 Mitsubishi Eclipse ?

I am 17, and I was thinking about my first car, and I've been doing some research and I love the Mitsubishi Eclipse and I can afford to buy one since $1000-9000 is in my price range, I found a perfect 1999 Black Mitsubishi Eclipse is great condition for $6,999, but since I'm a new driver insurance will not be easy but I don't want to take full coverage I just want PiP. Anyone that works at an insurance company that could help or anyone who knows how insurance works answer my question.""

Why is a public insurance option so terrible?

This health care debate is turning into a complete mess...and most of the opposition I hear is concerning universal health care and a government run health system. But this isn't the bill that's in Congress right now...it's not about universal health care, it's about affordable insurance. I don't understand...""

At what age will my car insurance go down?

im 19 now with a clean record.

USAA or Amica for auto insurance?

As far as I can tell, these are the two top auto insurance companies... Which do you think is better, and why?""

Car Insurance Cost Estimate (UK)?

Iam 21 and 22 this year, i want to know an estimate car insurance cost for any car for a new driver, note i have passed my driving test a few years ago should be around 18, but i didnt really need a car back then. if Sum1 knows roughly how much i should be paying for car insurance please post here. i dont mind having the lowest benefits etc... just want a cheapest price estimate.""

""What would a $50,000 cadillac cost per month? + insurance?""

im looking into the cadillac sts (sp=47,000 - 78,000) and i want to know the monthly cost.. $275,000 yearly income (get paid yearly).. which is about $23,000 a month combined. take into account teenager insurance which i heard can be brutal and also... would buying this car stretch my finances? i dont want my family to be uncomfortable for just a car. like someone earlier told me 1k a month for my car payment but i want to know the other estimates""

How much will my insurance go up?

about 3 months ago i got a ticket for going 23 over and went to court. the judge gave me a $40 fine and said if i didn't get another ticket for 6 months that the first ticket wouldn't be on my record. this morning i got a ticket for going 10 over. it was really stupid because i was going the speed limit and had cruise locked on but it was a downhill and i got going. the ticket is $20 and i dont have to appear in court. Will my insurance go up? if so how much should i expect. the judge told me last time that if the insurance company doesn't look at my driving that they dont send them notification.

Looking for the best prices in auto insurance and Quick!?

I know there are some reliable auto insurance companies out there with killer rates. Anyone know something good?

Can I pay a AAA Auto Insurance bill online?

I'm in California but I don't know if that makes any diffrence.

Cheap Insurance for 16 driver??

I am looking for the cheapest insurance company for a 16 year old driver that can't go on any other persons policy. Can only go on individual policy!!!! Thanks for any ideas or companies

Trying to figure out how much Car insurance to buy?

i want to get 15/30/5.for bodily and injury and property. is this good? or should i get more?

Health insurance question?

I would like to go to the doctor but i don't want my parents to know about it. i have an insurance from my father's work. Will they know about me going to the doctor, since i will use the family's insurance?""

I have geico insurance for Arizona. Will I still be covered if I go out of state?

I have Arizona insurance. But I might take a job in California. Will I still be covered if I move there. I don't know how long I will be. Maybe six or so. I don't want to change driver license and such over if I am not going to permanently live there. Anyone know if I will still be covered if I go out of state.

How to get insurance for a soccer league?

im doing my own adult soccer league in hemet california and i have a lot of things ready the only thing that i need its to get insurance for the league but i do not know how to get it. the people who will rent the field to me wants me to have an insirance for the league and if i do not get it i will not be able to start my league.. help please

Can i renew my geico auto insurance for just two months rather than six months?

my insurance expires in oct but i'm planning to sell my car by nov. so i don't want to pay for my 6 month renewal in oct. is there a way out? thanks for all suggestions.

Vw Lupo S insurance group 1.4L?

What insurance group would a 1.4L Lupo be in. Also roughly what price would it be in that group. Im 17 and after a quote with no modifications.

Full coverage Insurance question ?

Would I be covered if my fiance puts me on his full coverage insurance? I just sold my car so I will be driving his until I get my new one. I canceled my insurance. So I need to know if I need to have my own insurance, or if I will be covered by him just putting me on his. Thanks guys.""

Auto insurance question???!! HELP!!!!!!?

Hello, i have a question on teen auto insurance. Now i know how bad insurance is for teens and I know sports cars are a horrible choice for a first fully insured car, but my father surprised me with a 2005 V6 Ford Mustang and I would like to know if anyone out there can help me with just telling me how much I am going to be looking in to pay. I live in Orange and I am going to be under my parents, just an estimate on how much it would be each month or 6 months will be fine and please, no rude comments. I understand how foolish it is of me to have a sports car at my age, but I already had an Altima 3.5 se-R with an air intake and drive it perfectly, always obeying speed limits, though this probably isn't going to help with the insurance cost. If you know from experience even better! thanks for ur time.""

I need a Dentist......I have no insurance....what should I do?

I haven't visited a dentist in years, but I really need to have a check-up. I have no insurance, What can I do? Where can I go?""

Why do women get cheaper car insurance?

Ive noticed all my guy friends pay a lot more for car insurance then i do why is that?

Collingwood Drivers Insurance?

https://www.linkedin.com/pulse/insurance-minor-marieke-fleming"

0 notes

allindiaitr · 8 years ago

Text

Deductions Allowed In Income Tax Payment For Life Insurance Plan

Life insurance policies are not only a life securing scheme, but also get attractive deductions during tax filing online. The tax benefits it offers are valid on capital invested, premium paid and the total maturity amount if it does not cross the prescribed threshold limit. According to section 80 of Income Tax Act, the maturity amount is exempted from tax liability and also no TDS will be cut from that amount. If the policy is under your family member’s name then they will receive the exemption on the total maturity amount.

However, according to section 80DD, up to INR 50,000 of deduction is allowed for each individual during tax filing online. The deduction will go higher up to INR 75,000 if the person has severe disabilities. But any amount received under the Keyman Insurance Policy is not exempted from tax liabilities and also amount received on death of a policy taker are not exempted from tax liabilities. Other than these rules, all amounts received under these policies are exempted from any tax liabilities during tax filing online. Also, if the amount of premium paid is more than 10% of the sum assured then, the policy will be taxable and this rule is active from policy taken on or after 01/04/2012. If the policy exceeds the threshold of INR 1 lakh in a financial year, then it is liable to pay TDS on it. To claim the LIC deductions, you must declare the details during tax filing online and you will get to know if you are liable to pay any TDS or not. TDS will be cut only if the amount exceeds the limit of the mentioned amount described in section 80DD and 10 (10D). Also, if the policy taker is unable to produce PAN details, then 20% TDS will be cut from the amount payable. In case of exceeding the limit and availability of PAN details, only 2% TDS will be cut off. To get better understanding of the LIC and related exemptions, you can approach a professional CA before tax filing online.

Source : http://allindiaitr.blogspot.in/2017/01/deductions-allowed-in-income-tax.html

#income #tax #return #filing #efiling

0 notes

sunshineweb · 4 years ago

Text

RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS

What are Floating Rate Savings Bonds?

Hence, such bonds are sensitive to interest rate fluctuation. It is not like your typical Bank FD, where you know well in advance the interest rate payable by banks for the full FD tenure.

RBI Floating Rate Savings Bond, 2020 (Taxable) Features and Eligibility

In addition to above features, let me share certain important features of this bond.

# If holder of the bond turned NRI, then he can hold the bond up to maturity.

# The Bonds will be issued only in the electronic form and held at the credit of the holder in an account called Bond Ledger Account (BLA), opened with the Receiving Office.

# Interest will be payable directly to the bond holder’s account.

I have written a detailed post about RBI Floating Rate Savings Bonds, You can refer the same for more details.

Features of Pradhan Mantri Vaya Vandana Yojana (PMVVY)

Let us now discuss about the features and eligibility of Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020- 2023.

Some other features of this product are as below:-

# You can avail the loan facility after completion of 3 policy years. The maximum loan payable will be 75% of the purchase price. Interest on the loan will be recovered from the pension amount.

# Pension is payable at the end of each period, during the policy term of 10 years, as per the frequency of monthly/ quarterly/ half-yearly/ yearly as chosen by the pensioner at the time of purchase.

# Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme does not provide tax deduction benefit under section 80C of the Income Tax Act. Returns from this scheme will be taxed as per existing tax laws.

# There is no TDS on this product.

# You can buy this through LIC (either online or offline).

Read a complete detailed post “Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020 – 2023 – 5 Changes you must know“.

Features of Senior Citizen Savings Scheme (SCSS)

# Anyone who attained the age of 60 years or above can invest in this product.

# NRIs and HUF are not allowed to invest.

# You can open Senior Citizen Savings Scheme either in the post office or with recognized 24 PSU banks and one private bank.

# Minimum investment is Rs.1,000 and maximum is Rs.15,00,000.

# The current interest rate is 7.4% and will change on quarterly basis.

# Interest will be payable on quarterly basis.

# Account will not be extended automatically.

# You can extend for a period of 3 years after 5 years maturity period. However, you have to submit Form B within one year from the date of maturity.

# Also, such extended accounts can be closed after one year of extension without any penalty. Means after completion of 6th year, one can withdraw the amount without any penalty.

# Interest rate during such extension period will be as per prevailing rate of interest after 5 years maturity.

# Only one extension is allowed to the old account. Means after 5 years completion of SCSS, you can extend only for once. After that, the account will be matured.

# However, you are free to open one more account during the old account tenure or after maturity of old account subject to the maximum ceiling of Rs.15 lakh.

# Loan is not available.

# One can avail up to Rs.1,50,000 as a maximum benefit under Sec.80C by investing in SCSS scheme.

Read the complete post about SCSS at “Post Office Senior Citizen Scheme (SCSS)-Benefits and Interest Rate“.

RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS – Which is the best?

Let us understand which is the best among RBI Floating Rate Savings Bonds Vs PMVVY Vs SCSS. I will try to compare all these products with respect to the features for your benefit.

# Tenure

RBI Floating Rate Savings Bond offers you 7 years. PMVVY is for 10 years and SCSS is for 5 years.

# Minimum and maximum investment

# Interest rates

# Frequency of interest rate payment

In case of RBI Floating Rate Savings Bonds, the interest rate will change once in 6 months. Once on 1st January and second time on 1st July every year.

In case of PMVVY, the interest will be revised on yearly basis. For SCSS, it is on quarterly basis.

# Minimum Age

There is no such mention of a minimum age limit in RBI Floating Rate Bonds. However, in case of PMVVY and SCSS, the minimum age limit is 60 years.

# Liquidity

The Bonds are not allowed to transfer, trade or eligible for collateral.

# Loan facility

In case of RBI Floating Rate Bond, it is not eligible as collateral for availing loans from banks, financial Institutions and Non-Banking Financial Companies.

In case of SCSS, you are not allowed to avail the loan by pledging it. Because this scheme is meant for regular income from your investment.

# Tax Benefits while investing and the returns

Let us discuss the tax benefits of RBI Floating Rate Bond Vs PMVVY Vs SCSS during an investment and the tax treatment of interest income.

Tax Benefits during investment

Tax Benefits on interest income

In case of PMVVY and SCSS, returns from these scheme will be taxed as per existing tax laws.

# TDS Facility

In case of RBI Floating Rate Bonds, tax will be deducted at source while making payment of interest. However, by submitting the Form 15G/H, you can avoid the TDS.

In case of PMVVY, there is no TDS. But in case of SCSS, TDS can be deducted on interest earned if it exceeds the minimum limit prescribed by the Government.

How to buy?

You can buy RBI Floating Rate Bonds from designated Banks.

Refer our latest posts:-

Top 5 Super Top-up Health Insurance Plans in India 2020

RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS

Latest Post Office Interest Rates July-Sept 2020

Covid Standard Health Policy or Corona Kavach Policy – Features and Benefits

Government of India Floating Rate Savings Bonds, 2020 (Taxable) – Should you invest?

How to create ONE CRORE Rupees from EPF?

The post RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS appeared first on BasuNivesh.

RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS published first on https://mbploans.tumblr.com/

0 notes

sunshineweb · 4 years ago

Text

RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS

What are Floating Rate Savings Bonds?

Hence, such bonds are sensitive to interest rate fluctuation. It is not like your typical Bank FD, where you know well in advance the interest rate payable by banks for the full FD tenure.

RBI Floating Rate Savings Bond, 2020 (Taxable) Features and Eligibility

In addition to above features, let me share certain important features of this bond.

# If holder of the bond turned NRI, then he can hold the bond up to maturity.

# The Bonds will be issued only in the electronic form and held at the credit of the holder in an account called Bond Ledger Account (BLA), opened with the Receiving Office.

# Interest will be payable directly to the bond holder’s account.

I have written a detailed post about RBI Floating Rate Savings Bonds, You can refer the same for more details.

Features of Pradhan Mantri Vaya Vandana Yojana (PMVVY)

Let us now discuss about the features and eligibility of Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020- 2023.

Some other features of this product are as below:-

# You can avail the loan facility after completion of 3 policy years. The maximum loan payable will be 75% of the purchase price. Interest on the loan will be recovered from the pension amount.

# Pension is payable at the end of each period, during the policy term of 10 years, as per the frequency of monthly/ quarterly/ half-yearly/ yearly as chosen by the pensioner at the time of purchase.

# Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme does not provide tax deduction benefit under section 80C of the Income Tax Act. Returns from this scheme will be taxed as per existing tax laws.

# There is no TDS on this product.

# You can buy this through LIC (either online or offline).

Read a complete detailed post “Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020 – 2023 – 5 Changes you must know“.

Features of Senior Citizen Savings Scheme (SCSS)

# Anyone who attained the age of 60 years or above can invest in this product.

# NRIs and HUF are not allowed to invest.

# You can open Senior Citizen Savings Scheme either in the post office or with recognized 24 PSU banks and one private bank.

# Minimum investment is Rs.1,000 and maximum is Rs.15,00,000.

# The current interest rate is 7.4% and will change on quarterly basis.

# Interest will be payable on quarterly basis.

# Account will not be extended automatically.

# You can extend for a period of 3 years after 5 years maturity period. However, you have to submit Form B within one year from the date of maturity.

# Also, such extended accounts can be closed after one year of extension without any penalty. Means after completion of 6th year, one can withdraw the amount without any penalty.

# Interest rate during such extension period will be as per prevailing rate of interest after 5 years maturity.

# Only one extension is allowed to the old account. Means after 5 years completion of SCSS, you can extend only for once. After that, the account will be matured.

# However, you are free to open one more account during the old account tenure or after maturity of old account subject to the maximum ceiling of Rs.15 lakh.

# Loan is not available.

# One can avail up to Rs.1,50,000 as a maximum benefit under Sec.80C by investing in SCSS scheme.

Read the complete post about SCSS at “Post Office Senior Citizen Scheme (SCSS)-Benefits and Interest Rate“.

RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS – Which is the best?

Let us understand which is the best among RBI Floating Rate Savings Bonds Vs PMVVY Vs SCSS. I will try to compare all these products with respect to the features for your benefit.

# Tenure

RBI Floating Rate Savings Bond offers you 7 years. PMVVY is for 10 years and SCSS is for 5 years.

# Minimum and maximum investment

# Interest rates

# Frequency of interest rate payment

In case of RBI Floating Rate Savings Bonds, the interest rate will change once in 6 months. Once on 1st January and second time on 1st July every year.

In case of PMVVY, the interest will be revised on yearly basis. For SCSS, it is on quarterly basis.

# Minimum Age

There is no such mention of a minimum age limit in RBI Floating Rate Bonds. However, in case of PMVVY and SCSS, the minimum age limit is 60 years.

# Liquidity

The Bonds are not allowed to transfer, trade or eligible for collateral.

# Loan facility

In case of RBI Floating Rate Bond, it is not eligible as collateral for availing loans from banks, financial Institutions and Non-Banking Financial Companies.

In case of SCSS, you are not allowed to avail the loan by pledging it. Because this scheme is meant for regular income from your investment.

# Tax Benefits while investing and the returns

Let us discuss the tax benefits of RBI Floating Rate Bond Vs PMVVY Vs SCSS during an investment and the tax treatment of interest income.

Tax Benefits during investment

Tax Benefits on interest income

In case of PMVVY and SCSS, returns from these scheme will be taxed as per existing tax laws.

# TDS Facility

In case of RBI Floating Rate Bonds, tax will be deducted at source while making payment of interest. However, by submitting the Form 15G/H, you can avoid the TDS.

In case of PMVVY, there is no TDS. But in case of SCSS, TDS can be deducted on interest earned if it exceeds the minimum limit prescribed by the Government.

How to buy?

You can buy RBI Floating Rate Bonds from designated Banks.

Refer our latest posts:-

Top 5 Super Top-up Health Insurance Plans in India 2020

RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS

Latest Post Office Interest Rates July-Sept 2020

Covid Standard Health Policy or Corona Kavach Policy – Features and Benefits

Government of India Floating Rate Savings Bonds, 2020 (Taxable) – Should you invest?

How to create ONE CRORE Rupees from EPF?

The post RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS appeared first on BasuNivesh.

RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS published first on https://mbploans.tumblr.com/

0 notes

sunshineweb · 4 years ago

Text

RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS

What are Floating Rate Savings Bonds?

Hence, such bonds are sensitive to interest rate fluctuation. It is not like your typical Bank FD, where you know well in advance the interest rate payable by banks for the full FD tenure.

RBI Floating Rate Savings Bond, 2020 (Taxable) Features and Eligibility

In addition to above features, let me share certain important features of this bond.

# If holder of the bond turned NRI, then he can hold the bond up to maturity.

# The Bonds will be issued only in the electronic form and held at the credit of the holder in an account called Bond Ledger Account (BLA), opened with the Receiving Office.

# Interest will be payable directly to the bond holder’s account.

I have written a detailed post about RBI Floating Rate Savings Bonds, You can refer the same for more details.

Features of Pradhan Mantri Vaya Vandana Yojana (PMVVY)

Let us now discuss about the features and eligibility of Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020- 2023.

Some other features of this product are as below:-

# You can avail the loan facility after completion of 3 policy years. The maximum loan payable will be 75% of the purchase price. Interest on the loan will be recovered from the pension amount.

# Pension is payable at the end of each period, during the policy term of 10 years, as per the frequency of monthly/ quarterly/ half-yearly/ yearly as chosen by the pensioner at the time of purchase.

# Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme does not provide tax deduction benefit under section 80C of the Income Tax Act. Returns from this scheme will be taxed as per existing tax laws.

# There is no TDS on this product.

# You can buy this through LIC (either online or offline).

Read a complete detailed post “Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020 – 2023 – 5 Changes you must know“.

Features of Senior Citizen Savings Scheme (SCSS)

# Anyone who attained the age of 60 years or above can invest in this product.

# NRIs and HUF are not allowed to invest.

# You can open Senior Citizen Savings Scheme either in the post office or with recognized 24 PSU banks and one private bank.

# Minimum investment is Rs.1,000 and maximum is Rs.15,00,000.

# The current interest rate is 7.4% and will change on quarterly basis.

# Interest will be payable on quarterly basis.

# Account will not be extended automatically.

# You can extend for a period of 3 years after 5 years maturity period. However, you have to submit Form B within one year from the date of maturity.

# Also, such extended accounts can be closed after one year of extension without any penalty. Means after completion of 6th year, one can withdraw the amount without any penalty.

# Interest rate during such extension period will be as per prevailing rate of interest after 5 years maturity.

# Only one extension is allowed to the old account. Means after 5 years completion of SCSS, you can extend only for once. After that, the account will be matured.

# However, you are free to open one more account during the old account tenure or after maturity of old account subject to the maximum ceiling of Rs.15 lakh.

# Loan is not available.

# One can avail up to Rs.1,50,000 as a maximum benefit under Sec.80C by investing in SCSS scheme.

Read the complete post about SCSS at “Post Office Senior Citizen Scheme (SCSS)-Benefits and Interest Rate“.

RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS – Which is the best?

Let us understand which is the best among RBI Floating Rate Savings Bonds Vs PMVVY Vs SCSS. I will try to compare all these products with respect to the features for your benefit.

# Tenure

RBI Floating Rate Savings Bond offers you 7 years. PMVVY is for 10 years and SCSS is for 5 years.

# Minimum and maximum investment

# Interest rates

# Frequency of interest rate payment

In case of RBI Floating Rate Savings Bonds, the interest rate will change once in 6 months. Once on 1st January and second time on 1st July every year.

In case of PMVVY, the interest will be revised on yearly basis. For SCSS, it is on quarterly basis.

# Minimum Age

There is no such mention of a minimum age limit in RBI Floating Rate Bonds. However, in case of PMVVY and SCSS, the minimum age limit is 60 years.

# Liquidity

The Bonds are not allowed to transfer, trade or eligible for collateral.

# Loan facility

In case of RBI Floating Rate Bond, it is not eligible as collateral for availing loans from banks, financial Institutions and Non-Banking Financial Companies.

In case of SCSS, you are not allowed to avail the loan by pledging it. Because this scheme is meant for regular income from your investment.

# Tax Benefits while investing and the returns

Let us discuss the tax benefits of RBI Floating Rate Bond Vs PMVVY Vs SCSS during an investment and the tax treatment of interest income.

Tax Benefits during investment

Tax Benefits on interest income

In case of PMVVY and SCSS, returns from these scheme will be taxed as per existing tax laws.

# TDS Facility

In case of RBI Floating Rate Bonds, tax will be deducted at source while making payment of interest. However, by submitting the Form 15G/H, you can avoid the TDS.

In case of PMVVY, there is no TDS. But in case of SCSS, TDS can be deducted on interest earned if it exceeds the minimum limit prescribed by the Government.

How to buy?

You can buy RBI Floating Rate Bonds from designated Banks.

Refer our latest posts:-

RBI Floating Rate Savings Bond Vs PMVVY Vs SCSS

Latest Post Office Interest Rates July-Sept 2020

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sunshineweb · 4 years ago

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7.75% Government of India Bond Vs PMVVY Vs SCSS – Which is the best?

Many retirees are now in a confusing mode of which one to choose among 7.75% Government of India Bond Vs PMVVY Vs SCSS. Which is the best option to select?

Before judging the products, let us first understand the features of 7.75% Government of India Bond, PMVVY and SCSS in detail.

Features of 7.75% Government of India Bond Vs PMVVY Vs SCSS

# Features of 7.75% Government Of India Savings Bonds (Taxable)

# HUF and Individual (Single, Jointly, Either or Survivor, or on behalf of minor as a Guardian are allowed to invest in these bonds.

# This bond is not available for NRIs.

# Minimum amount is Rs.1,000 (face value of the bond) and there is no maximum limit for investment.

# The Bonds will be issued, in Demat form and credited to the Bond Ledger Account (BLA) of the investor/s on the date of tender of cash or the date of realization of draft/ cheque.

# Interest will be payable on half yearly basis. There is a cumulative option also available.

# It is a 7 years bond. Premature withdrawal is available only for those whose age is 60 years and above (that also with certain conditions) like-Lock in period for investors in the age bracket of 60 to 70 years shall be 6 years from the date of issue, Lock-in period for investors in the age bracket of 70 to 80 years shall be 5 years from the date of issue, Lock-in period for investors in the age of 80 years and above shall be 4 years from the date of issue.

# Interest income from 7.75% Government of India Savings Bonds will be taxable. However, there is no wealth tax you have to pay. Tax will be deducted at source (TDS) while interest is paid.

Refer a detailed post at “How to buy or invest in 7.75% Government of India Savings Bonds?

Features of Pradhan Mantri Vaya Vandana Yojana (PMVVY)

Let us now discuss about the features and eligibility of Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020- 2023.

Some other features of this product are as below:-

# You can avail the loan facility after completion of 3 policy years. The maximum loan payable will be 75% of the purchase price. Interest on the loan will be recovered from the pension amount.

# Pension is payable at the end of each period, during the policy term of 10 years, as per the frequency of monthly/ quarterly/ half-yearly/ yearly as chosen by the pensioner at the time of purchase.

# Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme does not provide tax deduction benefit under section 80C of the Income Tax Act. Returns from this scheme will be taxed as per existing tax laws.

# There is no TDS on this product.

# You can buy this through LIC (either online or offline).

Read a complete detailed post “Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020 – 2023 – 5 Changes you must know“.

Features of Senior Citizen Savings Scheme (SCSS)

# Anyone who attained the age of 60 years or above can invest in this product.

# NRIs and HUF are not allowed to invest.

# You can open Senior Citizen Savings Scheme either in the post office or with recognized 24 PSU banks and one private bank.

# Minimum investment is Rs.1,000 and maximum is Rs.15,00,000.

# The current interest rate is 7.4% and will change on quarterly basis.

# Interest will be payable on quarterly basis.

# Account will not be extended automatically.

# You can extend for a period of 3 years after 5 years maturity period. However, you have to submit Form B within one year from the date of maturity.

# Also, such extended accounts can be closed after one year of extension without any penalty. Means after completion of 6th year, one can withdraw the amount without any penalty.

# Interest rate during such extension period will be as per prevailing rate of interest after 5 years maturity.

# Only one extension is allowed to the old account. Means after 5 years completion of SCSS, you can extend only for once. After that, the account will be matured.

# However, you are free to open one more account during the old account tenure or after maturity of old account subject to the maximum ceiling of Rs.15 lakh.

# Loan is not available.

# One can avail up to Rs.1,50,000 as a maximum benefit under Sec.80C by investing in SCSS scheme.

Read the complete post about SCSS at “Post Office Senior Citizen Scheme (SCSS)-Benefits and Interest Rate“.

7.75% Government of India Bond Vs PMVVY Vs SCSS – Which is the best?

Now let us understand which is the best among 7.75% Government of India Bond Vs PMVVY Vs SCSS. I will try to compare all these products with respect to the features for your benefit.

# Tenure

7.75% Government of India Bond offers you 7 years. PMVVY is for 10 years and SCSS is for 5 years.

# Minimum and maximum investment

In case of 7.75% Government of India Bond, the minimum investment is Rs.1,000 and there is no maximum limit. However, in case of PMVVY, the minimum investment is Rs.1,56,658 for a yearly pension of Rs.12,000 and maximum investment is Rs.15,00,000. In case of SCSS, the minimum amount is Rs.1,00,000 and the maximum is Rs.15,00,000.

# Interest rates

In the case of 7.75% Government of India bond, the coupon is 7.75%. In the case of PMVVY and SCSS the current interest rates are 7.4%.

# Frequency of interest rate payment

In case of 7.75% Government of India Bond, the interest payment is either on a half-yearly basis or cumulative (at maturity). However, in case of PMVVY it is monthly, quarterly, half-yearly, or yearly. In case of SCSS, it is on a quarterly basis.

# Frequency of change in interest rates

There is big misconception about this. In case of 7.75% Government of India Bond, there will not be any change up to 7 years period.

However, in case of PMVVY, the interest will be revised on yearly basis. For SCSS, it is on quarterly basis.

# Minimum Age

There is no such mention of minimum age limit. However, in case of PMVVY and SCSS, the minimum age limit is 60 years.

# Liquidity

In case of 7.75% Government of India Bond, Premature encashment in respect of the Bonds shall be allowed for individual investors in the age group of 60 years and above, subject to submission of document relating to date of birth of the investor in support of age to the satisfaction of the issuing bank, after minimum lock in period from the date of issue as indicated below:

Lock in period for investors in the age bracket of 60 to 70 years shall be 6 years from the date of issue.

Lock in period for investors in the age bracket of 70 to 80 years shall be 5 years from the date of issue.

Lock in period for investors in the age of 80 years and above shall be 4 years from the date of issue.

# Loan facility

In case of 7.75% Government of India Bond, it is not be eligible as collateral for availing loans from banks, financial Institutions and Non-Banking Financial Companies.

In case of SCSS, you are not allowed to avail the loan by pledging it. Because this scheme is meant for regular income from your investment.

# Tax Benefits while investing and the returns

Let us discuss the tax benefits of 7.75% Government of India Bond Vs PMVVY Vs SCSS during investment and the tax treatment of interest income.

Tax Benefits during investment

In the case of 7.75% Government of India Bond and PMVVY, there are no tax benefits. However, in the case of SCSS, you can avail the tax benefits of up to Rs.1,50,000 under Sec.80C by investing in this product.

Tax Benefits on interest income

In 7.75% Government of India Bond, Interest on the Bonds will be taxable under the Income Tax Act, 1961 as applicable according to the relevant tax status of the Bondholders. The Bonds will be exempt from wealth-tax under the Wealth Tax Act, 1957.

In case of PMVVY and SCSS, returns from these scheme will be taxed as per existing tax laws.

# TDS Facility

In case of 7.75% Government of India Bonds, Tax will be deducted at source while making payment of interest on the Non-Cumulative Bonds from time to time and credited to Government Account. Tax on the interest portion of the maturity value will be deducted at source at the time of payment of the maturity proceeds on the Cumulative Bonds and credited to Government Account. However, by submitting the Form 15G/H, you can avoid the TDS.

In case of PMVVY, there is no TDS. But in case of SCSS, TDS can be deducted on interest earned if it exceeds the minimum limit prescribed by the Government.

How to buy?

You can buy 7.75% Government of India Savings Bonds from designated branches of SBI and Associate banks,18 Nationalized banks, 3 Private Sector banks (like HDFC and ICICI Banks) and Stock Holding Corporation of India Ltd.

Conclusion:-There is nothing called the best. However, with comparison to 7.75% Government of India Bond Vs PMVVY Vs SCSS, you can easily decide which is the best for your requirement. All three products are SAFE. Hence, choose the products based on your actual requirements.

Refer our latest posts:-

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The post 7.75% Government of India Bond Vs PMVVY Vs SCSS – Which is the best? appeared first on BasuNivesh.

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