7.1% PPF interest rate or 8.2% returns from Senior Citizen Savings Scheme (SCSS): Where should someone in 20% tax bracket invest?
My PPF corpus of about Rs 30 lakh matures on 31 March. I can continue the account for five years and withdraw every year an amount equivalent to the annual interest earned, or I can invest Rs 15 lakh each in two Senior Citizens’ Savings accounts for me and my spouse. My income tax slab is 20%. Which option is better?
Amit Maheshwari, Partner, AKM Global: A PPF account matures after 15 years from the end of the financial year in which it is opened.
Taxpayers prefer investing in the PPF as it falls in the exempt-exempt-exempt (EEE) category, which means the principal, interest earned and maturity amount are taxfree. On maturity, taxpayers can go for partial or full withdrawal, or extend the account for another five years. If you continue for another five years and withdraw equal amounts of interest every year, the interest amount will be wholly exempt from tax under Section 10(11) of the Income-tax Act, 1961.
However, if you decide to withdraw from the PPF and invest Rs 15 lakh each in the Senior Citizens’ Savings Scheme along with your spouse, the interest earned on such accounts shall be exempt under Section 80TTB of the Act up to Rs 50,000, applicable to each taxpayer. The interest on the PPF account, however, shall be exempt without any limit. Conversely, the deposit in the SCSS would be clubbed with the interest income from other sources for tax calculation, with the exemption limit of Rs 50,000.
Hence, based on your tax situation, you can pick the suitable option.
I will receive about Rs 20 lakh from the sale of a paternal property. After keeping about Rs 5 lakh as emergency fund, I plan to invest the rest in another property. Till then, where should I park the funds? I am looking for safe options that fetch 10-15%
