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What Is Exempt-Exempt-Exempt (EEE) In Income Tax In India?

Under the Exempt-Exempt-Exempt or EEE scheme, earnings, gains as well as withdrawals are tax-free*. It is a popular tax-saving scheme that helps in long-term financial planning.

Taxes act as fuel for government funding. They are crucial for supporting necessary public services, such as education and healthcare. While paying taxes is the responsibility of every eligible citizen within a country, high taxation can lead to a financial burden on some taxpayers. At this point, concepts like EEE come into play.

Exempt-Exempt-Exempt, or EEE, is an important concept in the taxation system that allows individuals to build wealth and save tax while complying with the regulations. Under this scheme, all investments, earnings and withdrawals remain tax-free.

Simply put, you can grow your savings and earn interest on them without worrying about paying anything to the tax authorities under the EEE scheme of Section 80C.

Let us discuss more about the EEE scheme, including EEE tax regime investment products, in detail.

What is EEE in Income Tax?

Exempt-Exempt-Exempt is a tax-exemption scheme that correlates with the deductions under Section 80C of the Income Tax Act. Certain tax-saving instruments can be utilised under this scheme to save tax on investments, interests, and maturity.

  • Suppose you invest a certain amount in EEE investment options like PPF or ULIPs**. In this scenario, your initial investment or contribution towards the chosen plan is tax-free. It means that part of your salary contribution towards the plan will not be taxed. This is the first “Exempt” of the EEE scheme.
  • As your investment grows and it starts gaining interest, those interests or gains will be tax-free. This is the second “Exempt” of the EEE scheme.
  • Finally, at the time of maturity, if you want to withdraw the fund, the amount will not be taxed. It means you neither have to pay taxes on your principal nor cumulative interest. This is the third and final “Exempt” of the EEE scheme.

Top EEE Investment Options to Consider

Now that you have understood the various types of provident Funds let us take a look at tax implementations on all these types:
Public Provident Fund (PPF)

  • Public Provident Fund (PPF)





    Perhaps the safest and most popular tax-saving scheme that has benefited individuals for decades is the PPF. It is still a highly sought-after investment option among taxpayers due to its risk-free nature.

    Backed up by the Central Government, it offers an opportunity to earn tax-free returns. You can open a PPF account in the bank or any local post office.

    Note that this scheme has a 15-year initial lock-in period. Once the plan reaches maturity after 15 years, you can extend the tenure in a block of five years. Under Section 80C, PPF offers tax deductions up to ₹1,50,000 per annum.

  • Unit Linked Insurance Plans (ULIPs)**

    ULIPs**, or Unit Linked Insurance Plans, are known for offering a variety of investment features and benefits. Some of the most attractive features of ULIPs include automatic portfolio management, goal safety, and multi-fund allocation.

    In general, most ULIPs offer around 5 to 9 fund options with different asset and equity allocations2. Further, they usually come with a lock-in period of five years, but you can extend it up to 20 years, depending on your preferences. Besides Section 80C deductions, ULIPs also offer exemptions on death benefits under Section 10(10 D).

  • Equity Linked Savings Scheme (ELSS)

    It is another EEE investment option that can be used for saving tax. Note that it allows you to enjoy tax-free capital gains up to ₹1,00,000. However, as your gains exceed ₹1,00,000, you will have to deal with long-term capital gains tax (LTCG) at the rate of 10%.

  • Sukanya Samriddhi Yojna (SSY)

    Sukanya Samriddhi Yojna was introduced as a part of the “Beti Bachao Beti Padhao” initiative of the government. It aims at assisting the guardian of a female child to raise funds for her future. You can have an SSY account in the name of your girl child, offering an annual interest rate of 7.6%.  Note that the maturity amount and the interest earned are tax-free under this scheme.

  • Employee Provident Fund (EPF)

    Finally, EPF, or simply PF, is a retirement program that falls under the EEE scheme. In this option, employers and employees are eligible for interest and are not subject to tax implementations under certain conditions. If you withdraw your EPF amount after its maturity, all your contributions, interests and withdrawals remain tax-free.

Final Thoughts

Exempt-Exempt-Exempt (EEE) has become a popular tax-saving option among taxpayers. Investing in products under the EEE scheme helps you maximise your earnings and gains while minimising your tax liabilities.

In this blog, we have discussed the top EEE investment options to choose from. Now, it is your turn to make the right choice considering your financial situation, annual income, long-term financial goals, and other deductions under Section 80C. We hope it helps!

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Frequently Asked Questions

Is NPS an EEE Investment Scheme?

Yes, the National Pension Scheme or NPS comes under the EEE tax category. It means all the contributions, interests, and withdrawals in NPS are eligible for tax exemptions under certain conditions.

Which is the best EEE investment option?

All the investment options defined for the EEE tax scheme are great. However, the best choice depends on your preferences, financial situation, and long-term objectives. Thus, consider all these factors before making the final choice.

Is EEE better than EET?

EET stands for Exempt-Exempt-Taxed. It means your investment and interest gains are tax-exempt, but your withdrawal will be taxed. Considering this, EEE is a better scheme as it allows exemption for investment, interests and withdrawals.

Disclaimer

  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not guaranteed issuance plans, and they will be subject to the Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and does not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication. However, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • Tax: * Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.
  • 2Market-linked returns are subject to market risks and terms & conditions of the product. The assumed rate of returns or illustrated amount may not be guaranteed and depends on market fluctuations.