manâ€™s axe. The money you get on maturity is not taxable either. This method of taxation is referred to as the â€˜exemptexempt- exemptâ€™ (EEE) method since all three stagesâ€"contribution, accumulation and withdrawalsâ€"are exempt of tax.
On the other hand, while contributions to, and accumulations in, certain insurance products such as pension plans are not taxable, the amounts received by way of lump sum withdrawal or periodical pensions are taxable in the year you receive it, i.e., pension plans are governed by the â€˜exempt-exempt-taxâ€™ (EET) method of taxation. For example, for a bank fixed deposit that might give you a return of 8 per cent the effective post-tax return for someone paying 30.9 per cent tax would be a figure lower than inflation-a mere 5.5 per cent. Therefore, the question that comes to mind is: financial planning or tax planning? Should I be saving in banks or in share markets or in MFs? A proper financial planning exercise, making full use of the tax provisions, is what everyone wants.
Tax Benefits While Investing In Mutual Funds
Under Section 80 C of the IT Act 1961: If one invests in any of the specified instruments, his gross total income stands reduced by an equal amount, subject to a maximum of Rs. 1 lakh every year and tax