ASSIGNMENT-2

TAXATION AND FINANCIAL

PLANNING

Submitted To Submitted by

Prof. Harpinder Kaur Name - Karishma

Class - MBA 4Th

Roll No - 1811717

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 To study and gather information about the Post office saving scheme, Public Provident
scheme, Equity linked saving schemes prevalent in India in 2020.Asssignment will cover
various feature of above schemes, interest rates offered, minimum & maximum amount
allowed, lock in period, eligibility, tax benefit etc.

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POST OFFICE SAVING SCHEME

Post Office Savings

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• India post offers many savings schemes which are a good investment option
especially, for those who can't contribute a high amount monthly. These investment
schemes are risk-free and offer guaranteed returns, which is why people prefer them
over some of the other investment options available. Not only do these schemes offer
fixed returns but some of the schemes also provide tax benefits under Section 80C of
the Income Tax Act.

Savings Schemes under Post Office Investments

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1. Post Office Savings Account

2. 5-Year Post Office Recurring Deposit Account (RD)

3. Post Office Time Deposit Account (TD)

4. Post Office Monthly Income Scheme Account (MIS)

5. Senior Citizen Savings Scheme (SCSS)

6. 15 year Public Provident Fund Account (PPF)

7. National Savings Certificates (NSC)

8. Kisan Vikas Patra (KVP)

9. Sukanya Samriddhi Accounts (SSA)

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 Features of Post Ofice Saving Schemes

a) Easy to invest: The saving schemes are easy to enrol in and are best suited for the
rural and as well as the urban investor, anyone who wants to hedge the risk in the
portfolio for a fixed decent return. Their simplicity and availability make these a
much-preferred savings option.
b) Simple procedure to en roll: Limited documentation and proper procedures in post
office ensures that these saving schemes are simple to opt for and safe to be locked
onto as they are also backed by the government
c) Investments for long-term: The investments in the Post Office Schemes are more
forward-looking and long-term oriented with the investment period extending up to
15 years for a PPF account. This acts as a huge help in retirement and pension
planning.
d) Tax exemption: Most of these schemes carry with them tax rebates under Section
80C for the deposit amount. Few of the schemes like the PPF, the SCSS, the Sukanya
Samriddhi Yojana, etc. also have the interest earned amount exempted from taxation.
e) Risk-free & competent interest rates: Interest rates in these schemes range from 4%
to 9% which is also risk-free. There is a minimal amount of risk involved as this is an
undertaking by the Government of India.
f) Different buckets of products: There is a wide range of products based on different
types of individuals. Public Provident Fund (PPF), Kisan Vikas Patra and Sukanya
Samriddhi Yojana are some of the more well-known schemes.

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 Minimum and Maximum Amount Allowed

Scheme Interest Rate Minimum Maximum Eligibility Tax

Investment Investment Implications

Post Office 4% per annum – Rs20 No limit Resident Indian, Tax free
Savings (p.a.) Minor and Interest up to
– Non-Cheque
Account Majors Rs50000 from
Facility Rs50
financial year
2018-19

Post Office First year – Rs200 No limit Individual Tax benefits up

Time Deposit 6.9% p.a. to 5 years under
Account (TD) section 80C on
Second year
deposits
-6.9% p.a.

Third Year –
6.9% p.a.

Fourth Year –
7.7% p.a.

Post Office 7.6 % per Rs 1500 For one account Individual Interest earned
Monthly annum payable holder Rs 4.5 is Taxable &
Income Scheme monthly lacs and joint No deduction
Account (MIS) account holders under Sec 80C
Rs 9 lacs for Deposits
made.

Senior Citizen 8.6 % p.a. Rs 1000 Maximum Individual of – Tax benefit

Savings (Compounded deposit over the age> 60 years under section
Scheme (SCSS) Annually) lifetime allowed or age >55 80C for
at Rs 15 lacs years who have deposits
opted for VRS
– TDS to be
or
deducted on
Superannuation
interest earned

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 for more than
Rs 50,000 p.a.

15 year Public 7.9 % p.a. Rs500 per Rs1.5 lacks per Individual Tax rebate
Provident Fund (Compounded financial year financial year under section
Account (PPF) Annually) 80C for
deposits
(maximum Rs
1.5 lacks pa)

National 7.9 % p.a. Rs100 No Limit Individual Tax rebate

Savings (Compounded under section
Certificates Annually) 80C for
(NSC) deposits
(maximum
Rs1.5 lacks pa)

Kisan Vikas 7.6 % p.a. Rs1000 No limit Individual Interest is

Patra (KVP) (Compounded (Adult) taxable but no
Annually) tax on the
amount
received on
maturity

Sukanya 8.4 % p.a. Rs1000 per Rs1.5 lacks per Girl Child – up Investment (up
Samriddhi (Compounded financial year financial year to 10 years to Rs1.5 lacks
Accounts Annually) from birth and 1 exempt under
additional year Section 80C),
of grace interest and
amount
received.

Eligibility Criteria

• Post Office Saving Scheme for Senior Citizen – Senior Citizen Saving Scheme

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• Post Office Saving Scheme for Girl Child – Sukanya Samriddhi Yojna

Tax benefits

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• Most of these schemes carry with them tax rebates under Section 80C for the deposit
amount. Few of the schemes like the PPF, the SCSS, the Sukanya Samriddhi Yojana,
etc. also have the interest earned amount exempted from taxation

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PUBLIC PROVIDENT FUND

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 Public provident fund

• Public Provident Fund (PPF) scheme is a long term investment option which offers an
attractive rate of interest and returns on the amount invested. The interest earned and
the returns are not taxable under income Tax. One has to open an PPF account under
this scheme and the amount deposited during a year will be claimed under section
80C deductions.

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 Features

a) Tenure - The PPF has a minimum tenure of 15 years, which can be extended in
blocks of 5 years as per your wish.

b) Investment Limits - PPF allows a minimum investment of Rs500 and a

maximum of Rs1.5 lakh for each financial year. Investments can be made in lump
sum or in a maximum of 12 instalments.

c) Opening Balance - The account can be opened with just Rs100. Annual
investments above Rs1.5 lakh will not earn interest and will not be eligible for tax
saving. .f

d) Deposit Frequency – Deposits into a PPF account has to be made at least once
every year for 15 years.

e) Mode of deposit – The deposit into a PPF account can be made either by way of
cash, cheque, Demand Draft or through an online fund transfer.

f) Nomination – A PPF account holder can designate a nominee for his account
either at the time of opening the account or subsequently.

g) Joint accounts – A PPF account can be held only in the name of one individual.
Opening an account in joint names is not allowed.

h) Risk factor – Since PPF is backed by the Indian government, it offers guaranteed,
risk-free returns as well as complete capital protection. The element of risk
involved in holding a PPF account is minimal.

i) Who can invest in PPF – Any Indian citizen can invest in PPF. One citizen can
have only one PPF account unless the second account is in the name of a minor.
NRIs and HUFs are not eligible to open a PPF account.

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 Minimum and maximum amount allowed

• The minimum annual contribution that can be made to a PPF account is Rs.500 while
the maximum is capped at Rs.1.5 lakh. The maximum limit applies to contributions
made by a person for himself and for a minor child, both. There can be a maximum of
12 contributions in a year.

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 Interest Rate offered

• Interest on PPF is calculated monthly on the lowest balance between the close of the
fifth day and the last day of every month, i.e. for the purpose of interest calculation.
However, the amount that is deposited into the account before 5th of the month is
only considered. So if any money is deposited on 6th of a month, then no interest will
be paid on that amount in the respective month. Hence it is advised that deposits
should be made between 1st and 5th of the month to maximize the returns.

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 Eligibility Criteria

• Any individual who is a resident of India can only open a PPF account. NRIs are not
eligible to open PPF accounts. However, a resident Indian who has become an NRI
after opening a PPF account can continue the account till maturity. Additionally,
parents/guardians can also open PPF accounts for their minor children. Opening of
joint accounts and multiple accounts are not allowed.

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 Lock in period

• There is a lock-in period of 15 years and the money can be withdrawn in full after its
maturity period. However, pre-mature withdrawals can be made from the start of the
seventh financial year. The maximum amount that can be withdrawn pre-maturely is
equal to 50% of the amount that stood in the account at the end of 4th year preceding
year or the end of immediately preceding year whichever is lower.

• After 15 years of maturity, full PPF amount can be withdrawn and all is tax free,
including the interest amount as well

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 Tax benefits

• Most of these schemes carry with them tax rebates under Section 80C for the deposit
amount. Few of the schemes like the PPF, the SCSS, the Sukanya Samriddhi Yojana,
etc. also have the interest earned amount exempted from taxation.

• PPF falls under EEE (Exempt Exempt Exempt) tax basket. Contribution to PPF
account is eligible for tax benefit under Section 80C of the Income Tax Act. Interest
earned is exempt from income tax and maturity proceeds are also exempt from tax.

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EUITY LINKED SAVING SCHEMES

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 Equity Linked Savings Schemed

• Equity Linked Savings Scheme (ELSS) is a kind of mutual fund scheme that
predominantly invests in equity and equity related instruments to generate high
returns.

• What makes ELSS different from other equity mutual fund schemes is that investment
upto ₹1.5 lakh in ELSS is eligible for deduction from taxable income in a financial
year. The scheme comes with a statutory lock-in period of 3 years for each SIP. It is
the only mutual fund scheme that qualifies for tax deduction under Section 80(C) of
the IT Act.

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 Features

• It is a tax-saving scheme that preponderantly invests in a very heterogeneous portfolio

of stocks.

• The amount invested is subjected to a mandatory lock-in period of 3 years.

• ELSS are considered as the most popular tax-saving investment choices.

• You can invest with a minimum amount of ₹500 and then multiples of ₹500.

• Investors have an option of investing through SIPs which brings about a disciplined
approach towards accumulating savings.

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 Maximum and Minimum Amount Allowed

• One of the best reasons to invest in a mutual fund is that you don't need to invest a
lump sum amount at one time. You can begin with an amount as low as ₹500 as an
initial form of investment.

• One can invest in ELSS up to maximum limit of Rs.1,50,000 per year.

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Interest Rate offered

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 Lock in period

• Traditional modes of investment such as Public Provident Fund (PPF) and National
Savings Certificate (NSC), an ELSS also has a minimum lock-in period of 3 years
while the former two have a lock-in period of 15 years and 8 years respectively. ELSS
comes with a shortest lock-in period of 3 years.

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 Tax benefits

• If your mutual fund savings offers tax saving opportunity, along with high investment
growth, what more can you ask for ELSS allows you to save taxes, as investment up
to ₹1.5 lakh in these schemes is eligible for tax exemption,

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