Is the interest earned from PPF, EPF, SSY Taxable in new tax regime?

Is the interest earned from PPF, EPF, SSY Taxable in new tax regime?

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Published: February 1, 2020 at 8:08 pm

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The new tax regimen has many worried. Their favourite tax saving instruments are out of the equation if they choose the new tax regimen – which is beneficial for some and not so for others. See example links below. If you choose the new tax regime, will the interest earned from PPF, EPF, SSY taxable?

Short answer: The interest earned from PPF, EPF, SSY, gains from NPS are not taxable if you choose to be taxed under the new tax regime. So what has changed? You cannot use for saving tax. This means, your taxable income will become higher in the new tax regime and may or may not be subject to more income tax.

So in the old tax regime, PPF, SSY, EPF and the withdrawable portion of NPS are  EEE instruments and in the new tax regime, they become TEE (taxable-exempt-exempt).

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To decide which regime to choose, see examples here: New tax regime (section 115BAC): you cannot avail these deductions! Also this video

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2 Comments

  1. I understood from the FM’s budget speech that there will be two tax regimes, old and new. The tax payer has the option to select the tax regime. He can continue with the old tax regime using the tax exemptions and pay by the current tax rate or move to the new tax regime without exemptions which has a lower tax rate. It is up to the tax payer to select the tax regime.

  2. Pls check page 69 of finance bill

    Clause 13 of the Bill seeks to amend section 17 of the
    Income-tax Act relating to “salary”, “perquisite” and “profits in
    lieu of salary” defined.
    Sub-clause (vii) of clause (2) of the said section
    provides that the amount of any contribution to an approved
    superannuation fund by the employer in respect of the
    assessee, shall be treated as perquisite to the extent it
    exceeds one lakh and fifty thousand rupees.
    It is proposed to amend the provisions of clause (2) of
    the said section so as to substitute sub-clause (vii) of the
    said clause to provide that the amount or the aggregate
    amounts of any contribution made by the employer in
    respect of the assessee, to the account of an assessee in a
    recognised provident fund; in the scheme referred to in subsection (1) of section 80CCD; and in an approved
    superannuation fund shall be treated as perquisite, to the
    extent it exceeds seven lakh and fifty thousand rupees in a
    previous year.
    It is further proposed to insert a new sub-clause (viia) in
    the said clause (2) so as to provide that annual accretion by
    way of interest, dividend or any other amount of similar
    nature during the previous year to the balance at the credit of
    the fund or scheme referred to in sub-clause (vii) may also
    be treated as perquisite to the extent it relates to the
    contribution referred to in the said new sub-clause (vii),
    which is included in total income and shall be computed in
    the prescribed manner.
    These amendments will take effect from 1st April, 2021
    and will, accordingly, apply in relation to the assessment
    year 2021-2022 and subsequent assessment years.

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