Tax Deduction for small Schemes: TDS is deducted only on such transactions when the value of payment exceeds the prescribed limit. If the value does not exceed the prescribed limit, no TDS is deducted.
New Delhi: Post Office offers many long term and short term investment plans. However, not all schemes are tax-free. The interest earned on many post office schemes is taxable and exemption is not available on them under Section 80C of the Income Tax Act, 1961.
It is important to note that TDS is deducted only on such transactions when the value of payment exceeds the prescribed limit. If the value does not exceed the prescribed limit, no TDS is deducted.
What is TDS?
‘Tax deducted at source’ is called TDS. It is designed to collect tax payments directly from a person’s source of income. TDS is a mechanism used by the government to collect taxes so that the revenue (in whole or in part) can be collected immediately rather than earned later in order to reduce tax evasion.
Here, details of those post office investment schemes are being given on which TDS is deducted and on which TDS is not deducted.
India Post Recurring Deposit
The rule for the general public is that the bank or post office will deduct TDS if the interest earned on recurring deposits is more than Rs 40,000. If the interest earned is less than this limit then no tax will be deducted. The limit for deducting TDS for senior citizens is Rs 50,000.
India Post TimeDeposit
Under Section 80C of the Income Tax Act, the amount deposited under a 5-year time deposit (up to Rs 1.5 lakh) will be eligible for tax deduction. This means that the amount deposited in TD account for one year, two years or three years is not eligible for tax deduction.
Under this scheme, tax is deducted on the interest received. While filing your tax return, you have to include interest income earned under “Income from other sources” and pay the appropriate income tax rate.
Post Office Monthly Installment Scheme Account (MIS)
The interest earned under this scheme is taxable, and there is no deduction under section 80C on the deposited amount. TDS will be deducted on interest exceeding Rs 40,000. In case of senior citizens this limit is fifty thousand rupees.
In case of Senior Citizens (SCSS)
Under this scheme, tax benefit is available on the amount deposited under Section 80C. TDS is deducted on interest exceeding Rs 50,000 per year.
Mahila Samman Savings Card
Under Mahila Samman Savings Certificate, TDS is deducted on interest of more than Rs 50,000 for senior citizens and Rs 40,000 for ordinary citizens.
Public Provident Fund Account (PPF)
PPF comes under the exempt category, tax exemption will be available under Section 80C for deposits (maximum Rs 1.5 lakh per year), and the interest is tax free.
National Savings Certificate (NSC)
Under this scheme, deposits up to Rs 1.5 lakh are eligible for tax exemption under Section 80C of the Income Tax Act. Unlike fixed deposits, TDS is not applicable on the interest amount on NSC.
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