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How to Claim HRA: House Rent Allowance, generally known as HRA, is an aggregate paid by employees as part of their earnings. This is mainly done as it helps offer employees tax profits towards the payment for housings every year.

How much HRA allowance requires to be paid to the employee is made by the employer based on several different conditions such as the city of residence and the salary. The house rent allowance serves to be quite advantageous to salaried employees in India, and it is regulated by the provisions of Section 10(13A) of the IT Act.

To claim HRA, you need to submit the PAN number of your house owner, receipts and Lease agreement to your landlord. In this article, we inform you about how to claim HRA from the employer. What is a rental agreement? Should you get the rental agreement made registered and notarized? Can you claim HRA by paying rent to parents, brother, sister, wife/ spouse or sister–in–law? Do you need to get a revenue stamp? What is the format of rent receipts, how many rent receipts to submit?

• Basis on Which HRA is Calculated and Decided
• How to Acclaim HRA from your Employer?
• Rental Agreement and Notary
• Rent Receipts
• Rental Agreement and Stamp Paper
• FAQ’s about HRA

Basis on Which HRA is Calculated and Decided

Mainly, HRA is decided based on the salary. Although some other elements also affect HRA, for example, the city in which the employee lives. In case the person lives in a metro city, she or he is entitled to an HRA equal to 50% of the salary.

The entitlement is 40% of the wage for cities other than a metro area. To calculate the HRA, the earnings are explained as the aggregate of the basic salary, dearness allowances, and commissions. If a worker does not receive a dearness allowance or a commission, then the HRA will be around 40% – 50% of the salary. The actual HRA provided in all probability will be the lowest of the given three provisions:

• The exact amount received as the HRA from the employer.
• The actual rent that is paid should be less than 10% of the basic earnings.
• In case you’re staying in a non-metro city, 40% of the basic salary and 50% if you live in a metro city.

How to Acclaim HRA from your Employer?

The employer issues HRA or House Rent Allowance to the employee to meet of the employee’s accommodation for his residing causes. Income Tax Department has systemized the way of declaring HRA by introducing Form 12BB.

Your TDS will be adjusted, so you don’t have to pay tax on HRA, and your final tax liability will be deliberated accordingly. To acclaim HRA from your employer, you need to provide the following information to your employer:

• Reside physically: you must reside physically in the house mentioned by you for claiming HRA exemption. In case your landlords are your parents, you have to ensure that they include the rental income too while filing their returns.
• Rental agreement or lease: you have to sign up for a valid lease with the landlord. This lease will have information on the lodging on a lease, the rent agreed, and the lease period. For the shared accommodation case, you also have to mention the number of tenants co-sharing the accommodation, the ratio in which rent is divided, and how the utility bills are split and the before mentioned details in the rent agreement. Your employer might ask for this document.
• PAN number of landlord: it is mandatory to obtain the PAN number of the landlord if the annual rent paid by you is more than Rs. 1,00,000 and report it to the employer to acclaim HRA exemption. If PAN is not available by chance, then your landlord must be willing to offer you a declaration to this effect. Alongside the statement, you need to gain ‘Form 60’ dully filled up by your landlord, in case the PAN number is not available. If your landlord is not offering you a PAN number, the maximum amount of HRA that you can claim is Rs. 8,333.
• Rent Payments: Instead of cash, try to make payments, preferably through banking channels. Using banking channels, you can provide an electronic trail of money for the transactions that had occurred.
• Rent Receipts: The employer must collect proof of rent payment from permitting you the exemption on HRA. The employer will offer you the exemption on HRA based on these receipts. Tax exemption will be evaluated only based on the rent receipt given by the employee mentioning the amount paid. Any amount paid above or over the rent receipt shall not be considered for exemption by the employer. It is mandatory to produce rent receipts to the employer for claiming HRA exemption for the monthly rent paid more than Rs. 3000 per month. Typically, employers require receipts for three months or so.
• Form 16: HRA or House Rent Allowance exemption would be evaluated by your employer and shown in Form 16 if rent receipts and rent agreement were submitted on time. One needs to show HRA in the calculation of Income from Salary in ITR.
• TDS: Tenants paying Rent to NRI landlords should remember to deduce TDS of 30% before making the payment towards rent. Remember to conclude tax at source at 5% from the rent paid to your landlord if you are paying rent above Rs. 50,000 per month. Interest at 1% per month is levied if you forget to deduct it and 1.5% per month where TDS is deducted but not deposited. It would also give you a penalty of Rs. 200 per day for the period of delay.

Rental Agreement and Notary

Notarization usually alludes to check and giving a seal of validness to a document. This is done by a Notary who is delegated under the Notaries Act. Registration then again in registering the record with a neighbourhood Sub-Registrar office. The systems for both are represented by various Acts and can consequently be considered two completely multiple methods.

In India, it isn’t required to notarize a tenant contract. As long as it is imprinted on Stamp paper and is signed by the two parties and two observers, it is viewed as restricting. Nonetheless, if you wish to notarize it, you may do as such.

The work of the notary official is to confirm everything in the document and validate the record whenever everything is discovered to be authentic about the report, just as the deponent.

A Notary public is somebody delegated by the State/Central Govt. what’s more, his/her essential obligation is to dissuade fakes and imitations by directing/seeing record marking and realness check. Aside from this, Notary Public additionally performs duties like promise organization, testimony marking, record support and performing wedding functions.

Rent Receipts

There is no proper format of rent receipts. It should include the landlord’s name, rent amount, address of the rented place, landlord’s PAN information and the duration for which rent is received.

You don’t require the revenue stamp if you are paying rent via cheque or online. Revenue stamp is only required if payment is made in cash and receipt is more than Rs. 5000.

Rental Agreement and Stamp Paper

According to the Law, when one does a few exchanges like purchasing and selling land, business arrangements, renting property, one must make pay Stamp Duty to Central/State Govt.

The obligation to be paid fluctuates from one state to another, and if a state doesn’t have its Stamp Act, it will be supervised by the Indian Stamp Act. Stamp papers are verification that the necessary Stamp Duty has been paid to the Govt., similar to receipts.

The Stamp Paper esteem (Stamp Duty) relies on State to State. For instance, in Delhi, the Stamp Paper sum gave by Government to the Agreement is Rs. 50 whereas in Bangalore Rs. 20.

The Stamp Paper worth of Rent Agreement isn’t settled on the lease fixed between parties yet is chosen according to the stamp obligation set by the State Government. The scope of Stamp Duty for tenant contract is, for the most part, Rs 20, Rs 50 and Rs 100. You confirm with your manager if there is some cutoff on stamp paper.

We hope that this article helped you assess and understand how to claim HRA from your employer, rent receipt and rental agreement format.

FAQ’s about HRA

Question 1.
What are the most significant advantages of HRA?

Answer:
A significant advantage of the house rent allowance is that it serves as a medium to deduce the taxable income, leading to a reduction in the tax that you have to pay.

Question 2.
Can I acclaim HRA while filing ITR if I cant submit proof to the employer on time?

Answer:
Yes, you can acclaim HRA while filing ITR if you cant submit proof to the employer on time. During Income Tax Act doesn’t restrict the employee from claiming tax exemption for HRA while filing returns.

Still, there will be a discrepancy in the salary income reported in Form 26AS by your employer opposite that reported by you in your return. This may be swift for the department to send a communication seeking a response regarding the discrepancy.

If you haven’t acclaim HRA exemption from your employer, you can claim it directly. This exempt amount has to be deducted from your taxable earnings. The total net amount is shown as your’ income from salary in your income tax return.

If you acclaim HRA exemption in your tax return, you must still maintain rent receipts and lease agreement safely in your records if the assessing officer asks for them afterward.

Question 3.
Can I claim HRA exemption paying rent to my spouse/wife?

Answer:
No, you cannot. If you pay your rent to your spouse, this doesn’t qualify for HRA exemption because, as per the income tax department, you are originally supposed to stay with your spouse.

Question 4.
Can I claim HRA if it’s not part of my salary?

Answer:
Yes, if you are making payments in the rent for unfurnished or furnished lodgings occupied by you for your residing purposes but do not receive HRA from your employer, you can claim deduction under section 80GG.

Question 5.
Can I acclaim HRA for two houses?

Answer:
No, unfortunately, you cant. The HRA advantages are only available for one house in the concerned city of the workplace.

Question 6.
Can I claim HRA exemption paying rent to my parents or brother/sister-in-law?

Answer:
Yes, you can claim exemption on rent paid to others, including parents, brother or sister-in-law.

Question 7.
What is a Rental Agreement?

Answer:
A rental agreement is a commitment of rental mainly written between the owner of a property and a tenant who desires temporary possession. It is usually different from a lease which is more traditionally used for a fixed term.

The agreement identifies the parties, the property, the amount of rent for the period, and the rental period, as a minimum. The property owner might be referred to as the landlord/ lessor and the renter as the tenant/ lessee.

It is essential to have a rental agreement as it protects a landlord and tenant’s rights. It is also a method to avoid unnecessary eviction and hikes without prior notice of a minimum of one month. The rent agreement is also done online through the drafter.in, legaldesk.com, etc. The standard rent agreement is usually made of only 11 months.

Question 8.
What should you include in a rental agreement?

Answer:
A rental agreement or residential lease is the blueprint of a tenancy, and it lays out the right and responsibilities of both the tenants and landlords. It is a binding contract that both the parties can enforce in court and a convenient document full of business details like how long the tenant can occupy the property and the amount of rent due each month. Here we have included a list of what you should include in a rental agreement:

• Names of All occupants and tenants: Every adult who resides in the rental, including both members of an unmarried or married couple, should be named as tenants and sign the rental agreement. Requiisiting all adult occupants to be official tenants is a form of additional insurance for landlords.
• Description of Rental Property: Incorporate the complete address of the property (including unit and building number, if applicable). You will also want to note any specific parking spots or specific storage that are included. For instance, if the rental consists of assigned parking, be sure to write in the site or stall number.
• Term of the Tenancy: Rental agreements create short term tenancies that renew automatically until the landlord or tenants terminate. In contrast, leases make tenancies that end after a specific term. Whichever you use, be sure: note the starting date, the length of tenancy and the expiration date in case of lease.
• Rental Price: never write the amount of rent- spell out when and how it is being paid, like by mail to your office. To avoid confusion, spell out details like a. method of accepting payments. b. whether you charge a late rent charge, the amount of the cost, and the grace period. c. any charges if a rent check bounces.
• Security Deposits and Fees: Refrain from some of the most common disputes between tenants and landlords by being clear about the amount of security deposit, how you might use the deposit, whether you expect the tenant to replenish the deposit in the event you have to make a deduction mid-tenancy, when and how you will return the deposit and account for deduction after the tenant moves out, any non-refundable fees etc.
• Repair and Maintenance Policies: your best defence against rent-refusing battles and hassles over security deposits clearly explains your repair and maintenance policies.
• Landlords right to enter rental property: to avoid tenant claims of illegal entry or violation of privacy rights, your rental agreement or lease should clarify your right to access the rental.
• Rules and Important Policies: Some of the primary essential practices you can include are no illegal activity, smoking, pets etc.
• Contact information: Consider tenants requiring to contact you in writing about specific matters. Although instant messaging and texts might work for some discussions, you should be able to keep a reliable and printable in the event you ever need to show the court record of communications with your tenants.
• Required landlord disclosure: federal, local, and state laws may require you to disclose specific information in your lease or rental agreement.

UAN Helpdesk: UAN is the Universal Account Number consisting of 12 digits provided to each individual that opts in for the Employee Provident Fund programme provided by companies to their employees in India. This UAN can be used to check the accumulated balance in your EPF till the present date, and also for seeing employer and employee details relating to your EPF accounts. An online UAN help desk, especially at a time where the Coronavirus has taken over the offline world, is very important for all Provident Fund holders. In this article, we will solve the common problems that can arise with the UAN system.

• How to Register for the UAN Unified Member Portal?
• What to Do When You Forget Your UAN Password and Lose Access to Your Registered Phone Number
• What to Do When Your Details on UAN Are Wrong
• What to Do if I’m Not Being Able to View My EPF Passbook?
• Conclusion on UAN Helpdesk

How to Register for the UAN Unified Member Portal?

You need not register for the UAN by yourself as there are two ways to do it and this is only one of the ways. It is generally your employer that allocates you a UAN number that you can use to check all the details of your Employee Provident Fund. The employer should give this number to you while he or she offers you the EPF and you take it. If this does not happen for some reason, such as if you start working in a new company and choose to opt out of the EPF at that company, you will not receive the UAN number from your employer. In this case, you can generate the UAN number yourself using Aadhar.

Here are the steps you need to follow to generate a UAN number for yourself using the details on your Aadhar card:

1. First, go on to the UAN Unified Member Portal (this is the new UAN portal which is in use as of 28th December 2016).
2. On the bottom of the page, towards the right-hand side, you will find that there is a link there to attain an Aadhard-verified allotment of a UAN 12-digit number, click on that link.
3. Enter your Aadhar card number where it requires you to, after which the portal will send you an OTP on the mobile number which is registered with your Aadhard card.*
4. Enter the OTP once you receive it on your mobile phone or the registered mobile phone.
5. Once your Aadhar ID has been verified via OTP, your details will auto-fill (please make sure your Aadhar details are correct before you do all this. If not, please get the details updated by applying for Aadhar Card Correction at the nearest Aadhar verification centre).
6. You will receive the UAN number allotted to you via SMS, or after clicking on ‘submit’.

*Note: If the mobile number linked to your Aadhar is not your own and is someone else’s, please make sure that you have access to it when you are carrying out this process, otherwise it’ll only be a problem for you.

What to Do When You Forget Your UAN Password and Lose Access to Your Registered Phone Number

Before 28th December 2016, the process to change your UAN password required going through the UAN helpdesk. Now, all you need to do is go through the unified portal for UAN offered by the Employee Provident Fund Organisation (EPFO). You can easily change the password using an OTP that you can receive on your mobile phone on the registered number. If you don’t have access to that phone number anymore, you can follow the steps mentioned below.

Here are the steps required to change your password:

1. Get to the Unified Portal for UAN provided by EPFO and where it asks for your login credentials, select ‘forgot password.
2. The next page will ask for your UAN number and a captcha. Enter both and remember that the captcha is case-sensitive.
3. Next, you will see your name, date of birth and gender, which you are required to verify via your linked Aadhar card or PAN card.**
4. Once verified, you can set a new mobile number for your account. Make sure that it is the correct number and that you have access to it. You will receive an OTP on this number to allow you to set a new password.
5. When you see the sign that says “password successfully changed” you can use your new password to log into your UAN account.

**Note: If it says “incorrect details” then kindly check with your employer which Aadhar card or PAN card is linked with your UAN to get the correct number for verification.

What to Do When Your Details on UAN Are Wrong

The most inconvenient situation arises when we know our correct details, but they’re fed into the system in the wrong manner and you do not know how to change this and correct it. Don’t worry, we’re here to help you out with just that.

Given below are the steps that you are required to follow when trying to change your details on the UAN unified portal:

1. Log into your UAN account and look for the ‘manage’ tab.
2. Under the manage tab, there will be three options: contact details, KYC and modify basic details. Please click on “modify basic details.”
3. Once you arrive at the page, there will be an option for you to fill out your Aadhar card number. Enter the 12-digit number of your Aadhar card in the required space, and allow the system to do its work. It will auto-fill in your details based on the information on your Aadhard card.***
4. Once this is done, simply click on “update details” at the bottom of the page, and your details will be sent to the employer for approval.
5. If and when approved by the employer, the application will then go to the Dealing Assistant, Section Supervisor at the EPFO Field Office. From here on, the final approval lies with the Assistant Provident Fund Commissioner (APFC) or the Regional Provident Fund Commissioner (RPFC).

***Note: Please make sure that all the details on your Aadhar card are correct. If they are not, they will go on your UAN account linked to your provident fund, and this may become a problem later on. Sometimes your name can be spelled incorrectly on the Aadhar card, or even gender – make sure to get all these errors corrected in the Aadhar before correcting on the UAN portal.

What to Do if I’m Not Being Able to View My EPF Passbook?

Most of the time, new things, especially new technology, can end up confusing us more than helping us. You may be facing some difficulties in trying to view your EPF passbook on the new UAN portal. However, this is not a problem, because we shall help you figure this problem out.

Here are the steps you need to follow to view your EPF passbook on the new UAN portal:

1. Make sure that you are registered on the UAN portal. If you aren’t registered, please register yourself referring to the first section mentioned above.****
2. Go to the EPF website (http://www.epfindia.gov.in).
3. Find the section which is labelled “Our Services” and click on it.
4. Under this, there will be four sections: for employers, for employees, for international workers, and for pensioners. Please click on “for employees”.
5. The second option upon clicking “for employees” will be “Member Passbook” so click on that option, which will take you to a login page.
6. Enter your UAN account credentials and it will, by default, open to the passbook page.

****Note: If you have registered yourself on the UAN portal very recently, you might have to wait before you can view your passbook. The e-passbook for your EPF becomes available only six hours after you register yourself on the UAN portal.

Conclusion on UAN Helpdesk

All in all, the problems that may arise on the UAN portal are very easy to resolve, and you just need to find the right guidance to help you through it. Checking your EPF balance has never been easier seeing as how it has simply cut the red tapes in its by moving online. Even the processes to get your details changed have become very simple and easy to understand. If you’re having any more trouble with your UAN account, you will be able to find more articles written by us to help you through them.

 

 

Donations Eligible Under Section 80G: For promoting the concept of charity towards the poor and needy, the government of India has been regularly encouraging citizens to donate, and this donation could also be claimed as a deduction under Section 80G.

There are many government organisations, including NGO’s which are working for the upliftment of the poor, and one can choose to make donations to these designated organisations, which will, in turn, ensure that the money is being used for the right purposes.

• Section 80G
• What is the mode of payment?
• Conditions for claiming the deduction for donation under the section 80G
• How to claim for the deduction
• Donations that are Eligible for 100% Deduction Without any Qualifying Limit
• Donations that are Eligible for 50% Deduction Without any Qualifying Limit
• Donations that are Eligible for 100% Deduction Subject to 10% of Adjusted Gross Total Income
• Claiming deduction under the Section 80G in Form 16
• Donations deducted by the employer from the employee’s salary.
• Donation made to any institution or fund.

Section 80G

Contributions that are made to certain relief funds and charitable institutions could be claimed as a deduction under Section 80G of the Income Tax Act. However, all donations are not eligible for this deduction under section 80G. Only the donations made to suggested funds qualify as a deduction. This deduction could be claimed by any taxpayer – company, individual, firm or any other entity.

What is the Mode of Payment?

The deduction could be claimed only if the contribution has been made through a cheque, draft or in cash. However, the deduction is not allowed for donations that are made in cash exceeding the amount of Rs 10,000.

In-kind contributions like food, material, clothes, medicines, etc., don’t qualify for deduction under section 80G. From Financial Year 2017-2018 onwards: Any donations made in cash exceeding the amount of Rs 2,000 will not be permitted as a deduction.

The donations above the amount of Rs 2,000 must be made in any mode apart from cash to qualify as a deduction under section 80G. Donation Amount: The different donations specified in section 80G are eligible to determine up to either 100% or 50% with or without any restriction, as provided in section 80G.

Conditions for Claiming the Deduction for Donation under the Section 80G

Donations made are eligible for claiming as a deduction under Section 80G in all cases except in cases when the donation has been made of any kind (e.g., food, clothes, medicine etc.). For claiming this deduction, the donor also has to provide proof of payment. A receipt that is stamped is issued by the recipient trust in this regard. Details of that should be mentioned by the taxpayer when filing their Income Tax Return.

The receipt should surely mention the following details

• Name of the trust
• Address of trust
• Name of the donor
• The donated amount (mention in words and figures)
• The trust’s registration number, as given by the income tax department u/s 80G, along with its validity.

How to Claim for the Deduction?

To claim the deduction, the following details need to be submitted in one’s Income Tax Return

• Name of the recipient
• PAN of the recipient
• Address of the recipient
• Contribution Amount

Donations that are Eligible for 100% Deduction Without any Qualifying Limit

• The government’s set up National Defence Fund
• National Relief Fund set up by the Prime Minister.
• National Foundation established for Communal Harmony.
• An approved educational institution or university of National prominence
• The Zila Saksharta Samiti constituted in any of the districts under the chairmanship of the Collector of this district.
• Fund established by a State Government offering medical relief for the poor
• The National Illness Assistance Fund
• The National Blood Transfusion Council
• Any State Blood Transfusion Council
• National Trust for Welfare of Individuals with Autism, Mental Retardation, Cerebral Palsy, and Multiple Disabilities
• National Cultural Fund
• National Sports Fund\Fund for Application and Technology Development
• National Children’s Fund
• Lieutenant Governor’s Relief Fund or Chief Minister’s Relief Fund regarding any State or Union Territory
• Army Central Welfare Fund or the Air Force Central Welfare Fund or the Indian Naval Benevolent Fund, Chief Minister’s Cyclone Relief Fund Andhra Pradesh, 1996
• Maharashtra Chief Minister’s Relief Fund established between October 1st and 6th, 1993.
• Earthquake Relief Fund established by the Cheif Minister, Maharashtra
• Any fund established by the State Government of Gujarat exclusively in order to provide relief to the earthquake victims in Gujarat
• Any institution, trust or fund to which Section 80G(5C) applies to provide relief to earthquake victims in Gujarat (contribution given during January 26, 2001, and September 30, 2001) or
• Armenia Earthquake Relief Fund established by the Prime Minister
• Africa (Public Contributions – India) Fund
• Swachh Bharat Kosh (applicable from FY 2014-15)
• Clean Ganga Fund (suitable from FY 2014-15)
• The National Fund for Control of the Drug Abuse (suitable from FY 2015-16)

Donations that are Eligible for 50% Deduction Without any Qualifying Limit

• The Jawaharlal Nehru Memorial Fund
• The Prime Minister’s Drought Relief Fund
• The Indira Gandhi Memorial Trust
• The Rajiv Gandhi Foundation

Donations that are Eligible for 100% Deduction Subject to 10% of Adjusted Gross Total Income

• Contributions made to the government or any other approved local authority or institution to be utilised for promoting family planning.
• Donation made by any Company to the Indian Olympic Association or any other notified association or institution established in India to develop infrastructure for games and sports in India or the sponsorship for sports and games in India.
• Donations that are Eligible for 50% Deduction Subject to the 10% of the Adjusted Gross Total Income
• Any other fund or institution satisfying the conditions mentioned in the Section 80G(5)
• The government or any local authority is to be utilised for any charitable purpose apart from the purpose of promoting family planning.
• Any authority constituted in India to deal with and satisfy the need for housing accommodation or the purpose of planning, development of towns, cities, villages or both.
• Any corporation that has been referred to in Section 10(26BB) for promoting the interest of the minority communities.
• For repairing or renovation of any notified temple, mosque, gurudwara, church or other religious places.

Claiming Deduction under the Section 80G in Form 16

When paying salary to an employee, the employer needs to deduct the TDS on the employee’s salary and then pay salary after deducting income tax. The amount reduced as TDS by the employer is reflected in Form 16.

For the computation of the income tax, deductions claimed by the employee under the various sections of the income tax act must be informed to the employer. However, if an employee is claiming deduction under section 80G, the benefit of this deduction could only be claimed through the employer if the donation is made only to the funds whose names have been mentioned above (i.e., all funds deductions from which it is allowed without any maximum limit)

If the donation is made to funds that have a maximum limit of 10% of Gross Total Income, reductions in such cases can’t be claimed by the employer. Deductions for these donations can only be claimed during the time of filing income tax returns.

Donations Deducted by the Employer from the Employee’s Salary

An employee has paid for a donation from their salary, and the amount has been deducted from their salary by the employer. Deduction under section 80G could still be claimed. In such scenarios, although the donation receipt is in the employer’s name, the employer will have to issue a certificate stating that the contribution had been made from the employee’s salary account.

Donation Made to any Institution or Fund

Donation made to any institution or fund is allowed only if it is established in India for a charitable purpose and fulfills the stated condition.

where the fund or institution derives any income, such income wouldn’t be liable to be inclusive in its total income under provisions of sections 11 and 12 or the clause (23AA) of the clause (23C) of section 10:

given that where a fund or institution derives any income, be it profits and gains of business, the condition which such income wouldn’t be liable to inclusion in the total income under the provisions of section 11 might not apply concerning such income, in case —

• the fund or institution maintains separate books of accounts in respect to such business;
• the donations made to these institutions or fund are not used by it, directly or indirectly, for any such business
• the institution or fund issues to the person donating a certificate to the effect that it keeps separate books of account related to such business as well as that the donations received by them are not going to be used, directly or indirectly, for such business

The instrument under which these institution or funds are constituted doesn’t, or the rules governing these institutions or funds do not contain any provision for the transferor application at any time of the complete or any part of one’s income or assets of the institutions or funds for any purpose apart from a charitable purpose;

the institutions or funds are not expressed to be for the benefit of any specific religious community. However, a fund or institution incurring expenditure, during any of the former years, which is of a religious nature for any amount not exceeding five percent of its total income in that last year should be considered to be a fund or institution to which the provisions of this section apply to.

This donation to such fund is permitted as a deduction. An institution or fund set up for the benefits of Scheduled Castes (SC), backward classes, Scheduled Tribes (ST) or for women and children shall not be considered to be an institution or fund showcased to be for the benefits of a religious community or caste.

the fund or institution maintains regular accounts of all the receipts and expenditure;

the fund or institution is either constituted as a charitable public trust or has been registered under the Societies Registration Act, from the year 1860 (21 of 1860), or under any law, simultaneously to that Act in force in any part of the subcontinent or under the section 25 of Companies Act, of the year 1956 (1 of 1956), or is a University that has been established by law, or is any other educational institution that can be by the Government or by a University established by the law, or affiliated to any University established by the law, or is an institution financed wholly or in part by the Government or local authority;

concerning donations made after the 31st day of March 1992, the institution or fund is for the time being approved by the Commissioner following the rules made on this behalf; and

A deduction to which the entity is entitled in respect of any of the donations that have been made to a fund or institution to which the sub-section (5) applies should not be denied purely on either or both of the stated grounds, namely:

• that, after the donation, any part of the income of the fund or the institution has become chargeable to tax due to the non-compliance with any of these provisions of section 11, 12 or 12A
• that, under the clause (c) of sub-section (1) of section 13, the exemption under section 11 or 12 is denied to the institution or fund concerning any income coming to it from any investment referred to in clause (h) of sub-section (2) of section 13 where the average of the funds invested by it in a examine referred to in the said clause (h) doesn’t exceed five percent of the capital of the concern.

National Pension Scheme Under Section 80CCD: NPS is the acronym for The National Pension Scheme. It is a pension scheme designed for both private citizens as well as government employees. The NPS is among the most acclaimed options available to individuals who want to create a trust for their retirement that includes a regular monthly income.

It is widely observed to be one of the cheaper investment options invested in a range of investment avenues with exposure to the equity market. The returns being directly related to market performance, no guarantee of any particular amount can be stated.

• What is Section 80CCD?
• Who are eligible to join the NPS?
• How to register under the NPS?
• About the NPS account
• Return Policy
• How is the NPS return calculated?
• Assets for Fund Investment Scheme
• Scheme Preference
• About Pension Fund Manager
• About Annuity Service Providers
• Charges Applicable for NPS
• Tax Benefits under NPS
• About Exiting the NPS

What is Section 80CCD?

According to the 1961 income tax act, this provision is associated with the deductions offered to individuals who make contributions to the NPS. Until 2015, as per the 80CCD, the claim for tax deduction eligible for an individual was up to 1 Lakhs per annum against the contributions made to the NPS.

Who are Eligible to Join the NPS?

Any citizen of the country within the age of 16 to 65 who comply with KYC norms (know your customer) can opt for NPS accounts. The NPS is opened to everyone in the society, including people in business, self-employed individuals and non-salaried people of the country. NRI (non-resident Indians) are eligible to open an NPS account.

How to Register under the NPS?

Two ways of registering for the NPS account are:

Offline Registration of the Account

Given below are the steps to open your NPS account offline:

1. First, the candidate needs to visit their nearest office of the point of presence-service provider or POP-SP.
2. They will be required to submit their registration form in physical format with required documents for compliance with KYC.
3. Documents proving your identification, date of birth, photograph and address proof has to be submitted.
4. You need either your Aadhaar or your PAN card to open an account.
5. You will have to choose any one among two Central Recordkeeping Agencies for your account.
6. All documents such as address proof, identity proof, electricity bill, water bill, school leaving certificate, PAN card, driving license, rent receipt; will be accepted.

7. Suppose one fails to provide any of the documents listed above. In that case, the only other way is to submit a copy of their certificates of identity and address with a signature from personnel of the parliament or Member of the Legislative Assembly or Gazetted Officer or a Municipal Councillor can be accepted.

Online Registration of the Account

Given below are the steps to open your NPS account online:

1. At first, the candidate will have to visit the website of NDSL.
2. There are two ways of registering; one is Aadhaar based, and the other is through PAN-based verification.
3. For Aadhaar based verification, you will have to generate your eKYC from the Aadhaar website from the link provided on the NDSL website.
4. After submitting the eKYC form, personal details concerning name, gender, address, contact details are taken from it.
5. You will need scanned copies of a cancelled cheque and photograph for online submission, which you will upload.
6. For PAN registration, you can apply with your PAN number through the Karvy or NDSL website.
7. You have to provide certain specified details of your bank and your account number for it to be verified.
8. You will be needed to upload scanned copies of a cancelled cheque, your latest photograph, signatures and most importantly, your PAN card.
9. It is mandatory to make the minimum contribution of Rs 500 if you want a Tier I account and Rs 1000 for a Tier II account.
10. Then you will have to e-sign the form. In case of problems with e-signatures, you have to mail a physically attested copy of your CRA within 30 days of PRAN.
11. In the case of non-resident Indians, additional documents such as passports might be required.

About the NPS Account:

Tier I Account

The most basic NPS account offered by the government is the Tier I account. It is rigid in terms of withdrawal, with an equity exposure that helps plan the future requirements of its subscriber after retirement. There also income tax benefits available on the contributions made in a Tier I account. A minimum contribution of 1000 is necessary.

‌Tier II Account 

The add-on account is called the Tier II account. It is not as rigid as Tier I accounts, with the availability of flexible withdrawal schemes and no limit for the minimum balance required for subscribers. Income tax benefits are not available on contributions made in a Tier II account. There is no need for a minimum annual contribution.

Return Policy

One can expect a 12% to 14% return from the NPS Equity scheme in the long run. The maximum Equity investment can go up to 75%. The returns offered are much higher than most other tax-saving investments such as PPF. The scheme has been in effect for over a decade and has shown annualised returns of 8% to 10%.

For medical emergencies or educational purposes, one can withdraw an amount up to three times. All of these will be partial withdrawal without tax added to them.

How is the NPS Return Calculated?

The Indian calculation for the National Pension Scheme uses the formula:

A = P (1+r/n) ^ Nt

• P= The principal sum
• r/n= The Rate of Interest offered per annum
• N/n= The number of times the interest compounds
• T/t= The total tenure

Assets for Fund Investment Scheme 

The sets of considered assets for the investment of the NPS funds are categorised on the basis of return characteristics.

• Asset Class E – The maximum investment considered in this class is 50% of the total stated contribution. The investments are made predominantly in the legal equity market.
• Asset Class C – Investment is in fixed instruments apart from Government securities such as Debentures, Corporate Bonds, etc.
• Asset Class G – investments directly in government securities.
• Asset Class A – The alternative investment schemes include instruments such as MBS, AIFs, CMBS, etc.

Scheme Preference

Scheme Preference is referred to the Pension fund scheme chosen by a subscriber for investing in the pension contribution amount.

There are two methods available to invest in the account:

1. Active Choice: Among the E, C and G Asset classes, the subscriber is given the task of selecting a Fund manager and sorting the Pension Ratio that is to be invested among the individual funds. The subscriber can specify the desired percentage in which their money will be invested among the class assets in active choice. However, the allocation in the Equity market cannot cross 50%.
2. Auto Choice: The subscriber has the task of selecting a Fund manager. According to the Lifecycle Fund, their funds will be invested according to the Lifecycle matrix based on the age of the concerned subscriber. In auto choice, the system will begin to automatically calculate the percentages in asset allocation on the basis of the subscriber’s age.

About Pension Fund Manager

The Fund Manager is the one responsible for the implementation of a fund’s investment tactic and handling its activities professionally and with efficiency. They make crucial investment decisions, manage analysis, conduct researches, develop policies and also benefits packages.

About Annuity Service Providers 

The Annuity Service Provider is responsible for managing the funds, payments and providing for their subscribers, Annuity Services at the tie of their exit from the NPS system.

Charges Applicable for NPS

Although the NPS has the lowest fund management charges of about 0.01%, the fees and charges should not be ignored.

POPs Charges

POPs stand for Points of Presence, such as banks that are appointed by the PFRDA. The POPs provide services through their network of branches known as POP-SP. POPs ensure that all the jobs that are related to NPS are met in time. Their charges are stated below:

1. Initial Contribution
2. Initial Subscriber Registration
3. All Non-financial Transactions
4. eNPS
5. Persistency Fee

CRA Charges

CRA is Central Recordkeeping Agency. They are in charge of recordkeeping, customer service, administration and functions for all its NPS subscribers. Their fees are:

1. PRA Opening Charge
2. Charge per transaction
3. Annual Maintenance Charge

Investment Management Fee: The fees that Fund Managing companies like ICICI, LIC get for managing pension funds of its clients are Investment Management Fees. The investment management fee is about 0.01% currently (Rs 100) to manage Rs 10 lakhs.

Custodian Fee: The Stock Holding Corporation of India, also called the SCHIL, is accountable for the custody of all assets. The fees required for their maintenance is called Custodian Fee.

NPS Trust Fee: The NPS Trust has the responsibility of taking care of the funds under NPS. The trust holds a legal account with Axis Bank and is designated as the Trustee Bank.

Tax Benefits Under National Pension Scheme

Under subsection 80CCD (1B), an exclusive tax benefit is offered to all NPS subscribers. Additional deduction for a Tier I account may be up to Rs. 50,000. The Tax benefits of under corporate division are:

1. Corporate Subscriber: NPS Contribution up to 10% of the salary (basic + DA), subtractable from the taxable income except for any monetary limit.
2. Corporates: The employer’s contribution for NPS to 10% of the salary (basic + DA) can be subtractable from the account’s profit and loss.

What is Meant by Net Asset Value? 

Net Asset Value or the NAV is the cost of one unit of a fund. It is calculated at the end of each and every working day that lies between Monday and Friday. The calculation is done by the addition of all securities and cash in the said fund’s portfolio, from which the liabilities are subtracted, and the result is divided by the number of units issued by the fund.

About Exiting the NPS

The different categories of withdrawal from NPS according to the Regulations of 2015 are stated below.

Normal Superannuation

The least of 40% of the total accumulated pension of a subscriber has to be put to use for purchasing an Annuity providing for the monthly pension to the subscriber, and the amount is paid to the subscriber as a lump sum.

Upon Death

The least of 80% of the total accumulated pension of a subscriber has to be put to use for purchasing an Annuity to provide for the surviving spouse, and the amount is paid in one single payment to the subscriber.

Note: For both these cases, if the total corpus balance is less than or equals Rs. 2 lakhs on the date of retirement, the complete withdrawal option can be availed by the subscriber or the legal nominee (in case of death of subscriber).

Pre-mature Exit

The least of 80% of the total accumulated pension of a subscriber has to be put to use for purchasing an Annuity to provide a monthly pension. If the total corpus balance is less than or equals Rs. 1 lakh, on the date of resignation, the complete withdrawal option can be availed by the subscriber.

Term Deposits: Term Deposits are otherwise known as Fixed Deposits are an investment vehicle in which a lump-sum sum amount is deposited for a fixed length of time, ranging from one month to five years, at an agreed rate of interest. Organisations such as Banks, NBFCs (Non-banking financial companies), Credit unions, Post offices, and other financial organisations will have the options of Term Deposits. In this article, we have explained all the details of Term Deposits, it’s types. Read on to find out more.

Types of Term Deposits

The types of term deposits are:

1. Fixed Deposits
2. Recurring Deposits

Classification of Term Deposits

The term deposits are further classified into several ways which are discussed below:

Senior Citizen Term Deposits

A senior citizen is someone who has reached the age of sixty can enrol for this account. Most banks and financial institutions offer senior citizens a greater interest rate on term deposits. At some banks, senior citizens are also eligible for tax-advantaged term deposits.

Post Office Term Deposits

Certain financial services are also available in post offices. The Post Office Term Deposit is one such service. It can be opened as a single account or as a joint account. Post office term deposit accounts can be transferred from one post office to another, or many accounts can be held at the same post office.

The minimum deposit amount is Rs.200, and the current interest rate is 7.9% for a period of five years. Any deposit with a term of more than five years is eligible for tax benefits under Section 80C of the Income Tax Act of 1961.

Tax Saving Term Deposits

Section 80C of the Income Tax Act allows for a tax deduction of up to Rs 1.5 lakh on tax-saver deposits. These tax-saving term deposits have a 5-year lock-in period, and any earnings beyond Rs 40,000 are taxable. Interest rates typically vary from 5.5 percent to 7.75 percent.

Special Term Deposit Schemes For Children

There are a few unique deposit schemes dedicated to children’s welfare. The government’s “Sukanya Samriddhi Account” aims to improve the financial security of girl children over the age of ten. Different banks have different plans aimed at the financial well-being of children, such as Allahabad Bank’s “Sishu Mangal” deposit programme and Punjab National Bank’s “Balika Shiksha” programme. So any individuals can check with banks for children’s term deposit schemes.

Cumulative Term Deposits

Non-Cumulative Term Deposits

A non-cumulative term deposit is for investors who want a consistent rate of return. The interest on a non-cumulative term deposit is credited to the investor’s account at regular intervals, such as monthly, quarterly, or annual.

Short Term Deposits

A short-term deposit has a lock-in duration that might be anywhere from one to twelve months. Short-term deposits are appropriate for investors who want to get their money back quickly.

Long Term Deposits

Lock-in periods for long-term deposits range from one to ten years. These deposits provide a greater interest rate than short-term savings accounts.

Features of Term Deposits

The features of characteristics of Term Deposits are discussed below:

1. Interest Amount: The investor has the choice of receiving interest income at maturity or on a monthly, quarterly, or annual basis.
2. Economic Growth: The consistent interest received on the investment assures that the investors’ wealth grows even during market downturns.
3. Rollover: If an investor’s money isn’t needed by the term deposit’s maturity date, the deposit can be rolled over for a new term. The phrase “rollover” refers to the process of reinvesting maturity funds in a new term deposit and increasing the interest rate. As a result, when a term deposit matures, an investor does not have to use their money right away.
4. Fixed-rate of Interest: The rate of interest on term deposits is fixed and not affected by market changes.
5. Investment Safety: Since the term deposit interest rates are unaffected by economic fluctuations, it is one of the safest investment options accessible.
6. Loan Against Deposit: If an investor needs financial liquidity in an emergency, they can borrow up to 60-75 percent of the deposit amount.
7. Predetermined Investment Period: The investor has the option of choosing the tenor of the investment depending on the financial institution’s goals. The institution’s interest rate will typically be greater for a longer tenor. However, before investing, it’s a good idea to compare interest-to-tenor ratios.
8. Low Investment Limit: The minimum investment amount varies depending on the financial institution, but it is usually Rs 1000. However, there is no maximum amount that can be placed in term deposits.
9. Deposit Insurance: Any deposit in a qualified bank is entitled to an insurance cover of up to Rs 1 lakh under the Deposit Insurance and Credit Guarantee Corporation, according to RBI regulations (DICGC).

Drawbacks of Term Deposits

Though bank term deposits seem to be helpful, there are few disadvantages which one will have to consider and they are:

1. Since term deposits come with a fixed tenor, it is considered ‘locked-in’. If the investor opts to withdraw from the deposit before the lock-in period ends they are liable to pay a penalty to the financial institution along with lowered interest income.
2. Interest Earned on a deposit is taxable income and can be subject to a Tax Deducted at Source deduction under the Income Tax Act (TDS).

 FAQs on Term Deposits

Q. What are the risks of term deposits?
A. It might be costly to withdraw funds from a term deposit before it has matured. Fees and interest rate reductions apply to early withdrawals. You also won’t be able to add to your deposit with more money. With this in mind, putting your money in a term deposit can be a dangerous option if you need to make any deposits or withdrawals before the term deposit matures.

Q. Is term deposit and fixed deposit the same?
A. Yes, a term deposit is also known as fixed deposit. When a deposit is extended for a certain duration, such as 3 months, 6 months, or more, a term deposit is used, but a fixed deposit, or FD, is used when the deposit is for a period of six months or longer.

Q. What is the penalty for breaking a term deposit?
A. Many banks will refuse to pay interest on a term deposit that is ‘broken’ early, or will pay less. If you want to withdraw money from your term deposit, certain banks will require a 31-day notice. If the term is less than 31 days old, you may not be able to access the money until maturity.

The term “senior citizen” is defined by legislation as a citizen between the ages of 60 and 80 on the penultimate day of the preceding financial year.

• IT Returns Must Be Filed
• What are the Sources Of Revenue for the Senior Citizens?
• Senior Citizens Income Tax Brackets
• What Tax Exemptions Do Senior Citizens Have From Income Tax Returns?
• What Other Economic Privileges Do Senior Citizens Have In Terms Of Income Tax?

IT Returns Must Be Filed

In case a senior citizen or super senior citizen makes even the slightest amount of money through the budget year, they must still report income tax. Regardless of whether the income is not eligible for taxation, a tax return must be essentially filed to receive a tax deduction or provide official documentation of revenue generated during a budget year.

Senior citizens must fully implement the following income tax forms depending on what type of their revenue to file a tax return:

• ITR 1 should be submitted when the overall income is up to Rs 50 lakhs from wage, one house estate, other alternative sources, or farming produce up to Rs 5,000.
• ITR 2 should be submitted if the total income exceeds Rs 50 lakhs or if the earnings from two residential properties, capital gains, or agricultural productivity surpasses Rs 5,000.
• In the case of annual income from a business or profession, the taxpayer must complete ITR 3.
• ITR 4 extends to presumptive income.

It is mandatory for residents to submit their returns online. However, submitting the form online is not generally required for super senior citizens. They can register their ITR 1 (Sahaj) and ITR 4 (Sugam) either online or in person.

Individuals over the age of 80 as that of at the end of the preceding financial period are specifically referred to as super senior citizens.

What are the Sources Of Revenue for the Senior Citizens?

Senior citizens frequently earn their revenue from the below sources:

• retirement plans.
• Savings account returns or fixed deposit programs
• Rental revenue from the tenancy of a house.
• Capital Gains are a fundamental consideration.
• Schemes for senior citizens to focus on saving money.
• various projects involving reverse mortgages
• Post office deposit programs that also pay the interest
• And there are plenty more.

Senior Citizens Income Tax Brackets

• Both Income tax and the Health and Education Cess are not chargeable to earnings up to INR 3 lakh.
• Whenever the income is somewhere between INR 3 lakh and INR 5 lakh, the tax rate is 5%, and the Health and Education Cess is 4% of the income tax.
• When the income is within INR 5 lakh and INR 10 lakh, the tax rate is 20%, and the Health and Education Cess is 4% of the income tax.
• When income surpasses INR 10 lakh, income tax is collected at a rate of 30%, and the Health and Education Cess is charged at a rate of 4% of income tax.

Whether we prefer it to or not, we all care about the consequences and make considerable investment decisions to save and spend funds in order to have a safe and secure future.

Individuals are frequently on the search for investment decisions that will actually offer them a reasonably reliable and consistent source of income during their future post-retirement period.

The majority of senior citizens in India continue to endure financial hardships in old age since the overwhelming bulk of them have been unable to make a decent living. If they have any, their funds are insufficient to meet their day-to-day needs, specifically medical costs.

The Income Tax Act of India gives several incentives to senior citizens in order to significantly reduce their problems and issues and help to alleviate their stress and tension during this point in life.

What Tax Exemptions Do Senior Citizens Have From Income Tax Returns?

The standard exemption ceiling for regular individual taxpayers, up to which they are not actually needed to pay any income tax, is typically priced at Rs. 2.50 lakhs for the current financial year 2020-21.

The baseline exemption amount for Senior Citizens, on the other hand, is set at Rs. Three lakhs, i.e., Rs 50,000 more than usual taxpayers.

What Other Economic Privileges Do Senior Citizens Have In Terms Of Income Tax?

Here are some of the tax breaks and incentives that may help senior citizens with their financial obligations.

Health Insurance Tax Benefits

Section 80 D provides a bonus to senior citizens in exchange for paying their health insurance premiums.

Health insurance payments paid for senior people, or super senior citizens are eligible as a deduction under this provision up to a threshold of INR 50,000.

Furthermore, a deduction of INR 1,000,000 is actually conceivable under section 80DDB for expenditures spent in the medical treatment of a certain ailment. These two deductions have only been legally allowed under the previous tax structure.

The following conditions and related disorders are currently listed in Income Tax Rule 11DD and are allowed for deduction under Section 80DDB:

1. Dementia, Dystonia Musculorum Deformans, Chorea, Motor Neuron Disease, Ataxia, Aphasia, Parkinson’s Disease, and Hemiballismus are examples of neurological diseases that have been verified by a specialist neurologist and where the severity of impairment has been confirmed to be 40% or above.
2. Cancer that is malignant.
3. Acquired Immunodeficiency Syndrome or AIDS
4. Kidney failure is chronic.
5. Hematological illnesses such as hemophilia and thalassemia

Interest Income Advantage

Senior persons who are Indian residents would not have to pay income tax on interest earned up to Rs.50,000/- in a budgetary year.

This is due to the changes in the Finance Act of 2018.

This would include revenue from savings accounts, fixed deposit programs, and post office deposit schemes. It also incorporates any profits made on deposits with a Co-operative Society engaged in banking, as defined under section 80 TTA of the Income Tax Act.

TDS is automatically deducted if the interest income surpasses INR 50,000. Citizens above the age of 60, on the other contrary, can file Form 15H to make the claim of exemption from TDS deduction on cash generated by such investments.

There is no Obligation to Pay Advance Tax

The term “advance tax” specifically refers to a sum of money paid in advance to the Indian government that all people are obligated to pay.

Regular citizens must submit an advance tax if their tax burden is Rs.10,000/- or more in a current budget year, whereas senior citizens are entirely exempt from this legal obligation provided they make a decent living through a business or occupation.

They must only actually pay Self-Assessment Tax after evaluating their overall tax burden for the budgetary year.

There is no Taxation Applied Under the Reverse Mortgage Scheme

A senior citizen can indeed reverse mortgage any of his resources to generate monthly revenue.  The senior individual holds possession of the property and enjoys monthly compensation for it. The total sum paid directly to the owner in installments is completely independent of Income Tax.

Reimbursement According to Section 80CCD (1B)

Investments in the National Pension Scheme are authorized as a reduction under this provision, subject to a limit of INR 50,000. This tax deduction is in addition to the amount reduction legally permitted under Sections 80C and 80CCC.

An NPS account can be established when you’re under the age of 65.

Exemption under Section 80G

If senior citizens or super senior citizens contribute to specific humanitarian causes and organizations, they can request a tax exemption for their financial contribution. Tax breaks are permitted by law at either 50% or 100% of the total amount paid, depending, of course, on the charity.

Exemption in compliance with Section 80C

This provision authorizes senior citizens and super senior citizens to exclude up to Rs 1.5 lakhs from their overall total revenue for approved investment and expenditure schemes.

This clause comprises the following investment schemes:

• Fixed deposits plan to extend for five years
• Contributing in an Equity-Linked Savings Plan (ELSS).
• Active participation in the Public Provident Fund (PPF).
• Paying of life insurance premiums (LIP).
• Contributing to a Senior Citizen Savings Plan (SCSS).
• National Savings Certificates and schemes alike

Overview of Fixed Deposits: Fixed deposits are an investment option that offers stable interest rates, special rates for elderly citizens, a variety of interest payment methods, no market risk, and income tax benefits. In comparison to a typical savings account, a Fixed Deposit (FD) is a more safe investment choice that pays a greater rate of interest.

Fixed Deposit Interest Rates

In simple terms, fixed deposits are nothing but you are lending some money to the bank and in return, the bank pays interest for you. So these fixed deposit interest rates vary from bank to bank and also the Rates of interest are subject to change at any time. The rate of interest on an FD varies depending on the time period and the amount deposited.

Fixed Deposit Intrest Rates of Top 5 Banks

The top 5 interest rates offered by banks for fixed deposits are given below:

Bank Name	For General Citizens (p.a.)	For Senior Citizens (p.a)
ICICI Bank FD Interest Rate	2.50% to 5.50%	3.00% to 6.30%
HDFC Bank FD Interest Rate	2.50% to 5.50%	3.00% to 6.25%
State Bank of India FD Interest Rate	2.90% to 5.40%	3.40% to 6.20%
Canara Bank FD Interest Rate	2.95% to 5.50%	2.95% to 6.00%
Punjab National Bank FD Interest Rate	3.00% to 5.25%	3.50% to 5.75%

Advantages of Fixed Deposits

One of the safest investing options is fixed deposits. The list of advantages one can avail if he/she opts for Fixed deposits are given below:

1. Safety Assurance: Most of the Fixed deposits have been assigned the FAA+/Negative rating by CRISIL and the AA/Stable rating by CARE, indicating a high level of safety. So when you are opting for fixed deposits, make sure you are choosing the FAA+/Negative rating by CRISIL and the AA/Stable rating by CARE for security purposes.
2. High FD Interest Rates for Senior Citizens: Senior citizens get a better FD interest rate when compared to individuals.
3. Nominations: All fixed deposits have the option of being nominated. In the event of a depositor’s death, the deposit and any interest would be repaid to the nominee, with no regard for the deceased’s heirs or legal representatives.
4. Auto-Renewal Process: Few banks offer an auto-renewal option. Where customers can opt for auto-renewal of fixed deposits as well as a simple maturity withdrawal process.
5. Premature Withdrawal: Few banks offer premature withdrawal. After three months from the date of deposit, you can make a premature withdrawal from your fixed deposit account. Individuals who make a premature withdrawal within six months of the deposit will be paid an annual interest rate.
6. TDS: No TDS is deducted at source on interest earned on fixed deposits up to 5,000 in a fiscal year.
7. Loan Facility: Up to 75% of the total principal deposit can be borrowed against fixed deposits. The interest rate on this loan is 2% more than the maximum fixed deposit interest rate. However, this depends from bank to bank.

Factors Affecting Fixed Deposits

The list of factors that affect fixed deposits are given below:

• Deposit Tenure: The shorter the term, the lower the interest rate; the long or medium term, the higher the interest rate.
• Deposit Amount: Higher deposit amounts, particularly bulk deposits above Rs.1 crore, will earn you higher interest rates.
• Depositor Type: Senior citizens often receive 0.25 percent to 0.50 percent more interest on fixed deposits than other depositors.

How To Open a Fixed Deposit Account?

Any individual can simply open a fixed deposit account by simply visiting the bank which offers the option of Fixed Deposits. Also, few banks even provide an online facility where one can create fixed deposit accounts online.

Types of Fixed Deposit Account

The types of fixed deposit accounts are:

• Cumulative Deposit: The interest received on the fixed deposit is credited annually and paid out along with the principle at maturity. It aids in the accumulation of a corpus because interest is compounded annually.
• Non-cumulative Deposit: The depositor receives interest on a regular basis.
  Payments can be made monthly, quarterly, half-yearly, or once a year. You can utilise your regular interest payments to cover your daily expenses.

Joint Fixed Deposits

Few banks do have the option of opening fixed deposit accounts jointly. In those cases, banks will allow a joint fixed deposit account with a maximum of three joint holders.

However, only the first listed applicant will be paid the interest on non-cumulative deposits, and their discharge will be binding on the joint holders. Interest is presumed to have accumulated in the name of the first applicant in the case of cumulative deposits. The maturity repayment will be made according to the directions on the FD application form.

Fixed Deposits for Non-Resident Indians (NRIs)

Most banks offer fixed deposit options for NRIs as well. Fixed deposits for NRIs have a maximum term of three years. The depositor’s NRO account will be credited with the repayment of the money as well as any interest received.

Banks accept fixed deposits from NRIs and Persons of Indian Origin on a non-repatriation basis, meaning that the interest and capital received cannot be transferred back to the country of residency or converted to foreign currency, according to RBI regulations. As needed, the tax will be deducted at the source.

FAQ’s on Fixed Deposits

The frequently asked questions on fixed deposits are given below:

Q. How does a fixed deposit work?
A. A Fixed Deposit secures a sum of money for the duration of the deposit. Banks give depositors the option of investing their money for durations ranging from seven days to ten years. The interest rate on a deposit is determined by the length of time the money is kept with the bank. The depositor is not permitted to withdraw funds prior to the deadline. The bank credits the depositor’s bank account with the principal and interest on the maturity date.

Q. Can I get monthly interest on fixed deposit?
A. Yes you can get monthly interest on fixed deposits. For that, you should choose periodic payouts and monthly frequency, you can earn a monthly interest payment.

Q. Is FD a good option?
A. A fixed deposit is a low-risk, low-return investment that is excellent for risk-averse and cautious investors. So, if you’re a cautious investor than, you can obviously go for fixed deposits.

TDS from Insurance Commission – Section 194 D: Insurance policies are not only for oneself but also for the ones who are dependent on you. So, it is advisable to take that insurance policy that helps you after retirement, medical emergencies, and help your dependent ones after some accidentals or deceased of the major. The ways a person can choose the policies are through agents, brokers, some websites, etc. By choosing the insurance from agents or brokers etc., they are subjected to TDS (Tax Deducted at Source) as mentioned under Section 194 D of the Income Tax Act.

Who is/are Eligible for Deduction Under Section 194 D?

The taxes were deducted by the organizations that make the payment to the resident person, as remuneration or rewards, by the course of action of commission or for the following purposes:-

1. Seek or obtained insurance business as central.
2. They are carrying on or reviving or renewal the policies of the insurance.

When the TDS Deduct under Insurance Commission of Section 194 D?

The Tax was deducted earlier to the following events under the Section 194 D of Income Tax Act on Insurance Commission:-

1. When the commission credited to the account of the payee.
2. When the payment is made through cash, cheque or any in kind.

What is the Rate of TDS (Tax Deducted at Source) Under Section 194 D?

• TDS, Tax Deducted at Source under the Section 194 D on Insurance Commission, is made to the resident, irrespective of the individual, company, or other persons category. They are deducted at the rate of 5 % (3.75 % w.e.f. 14/05/2020 to 31/05/2021)
• The Tax would not deduct the surcharge and H&E Cess. So the Tax will be deducted at the source at the introductory rates as mentioned above.
• If you do not have quoted PAN, then the rate of the TDS will be 20 %.

Detail of the payee	Rate of the TDS
Individual (Not includes Company)	5 %
Domestic Companies	10 %

What are the Conditions when the TDS is not Liable to be Deducted under Section 194 D?

There are two conditions in which TDS is not deducted under the Income Tax Section 194 D:

1. If the commission you get is not exceeded by Rs. 15000, and
2. Self Declaration Form of 15G and 15H.

Is there any Provision for non-deduction of the Tax or Lowered Rate of a Tax Deduction?

Anyone who receives commission can fill a form name Form 13 and apply to the Assessing Officer for a certificate authorizing the payer not to deduct Tax or decrease the tax rate.

If you do not provide the PAN of the applicant, then in accordance with Section 206AA (4), no certificates Under Section 197 will be given for the non-deduction or lower rate of deduction.

For Issuing TDS (Tax Deducted at Source) Certificates, Due Dates

For the financial year 2020-21, the TDS return date was extended from the 31st of March 2021 to the 15th of April 2021 due to the pandemic or other financial conditions. (Only for quarter one and quarter 2 of Financial Year 2021)

1. From April to June, the certificate will be issued before the 15th of August.
2. From July to September, the certificate will be issued before the 15th of November.
3. From October to December, the certificate will be issued before the 15th of February.
4. From January to March, the certificate will be issued before the 15th of June.

Reinsurance is not Covered by the Section 194 D

From insurance to insurance, reinsurance differs in a number of ways. There is no contractual relationship between the direct insured and reinsured; this is essential to remember in reinsurance.

There are separate contracts between the insured and the insurer and between the insurer and reinsurer. Insured gets all the valid claims from the insurer after the insurer pays to the insured, irrespective of whether the insurer can recover the same from the reinsurer.

The “Commission” is not coming under the TDS Section 194 D when a reinsurance company gets business from an insurance company at a premium less “Commission.” The commission is not payable to the agent for acquiring the insurance business.

Similarly, there will be no claim during the operation of the reinsurance treaty after the expiry of the term of insurance, and Profit Commission is payable to an insurance company by the reinsurance company after the expiry of the period of insurance. Therefore, Section 194 D TDS (Tax Deducted by Source) is not applicable or required for this.

Section 194 D of Income Tax Act, 1961 Extract

Any person responsible for paying resident any income from any source of remuneration or rewards does not matter if that person provides the pay in the form of commission or otherwise, for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of policies of insurance) shall at the time of the credit of such income to the account of the payee or during the time of the payment by cash or by issuing the cheque or by publishing the draft or by any of the other mode of payment, whichever is more accessible, deducts the income tax at whatsoever the rates in forces.

We have provided that there is no income tax deduction shall be made under this Section 194 D from any such income credited or paid before the 1st day of June 1973.

We are further provided that there is also no deduction shall be made under Section 194 D, in a case where the amount of such income or as the case may be the total sum of the amounts of such income credited or paid or likely to be credited during the financial year to the account of the payee does not exceed fifteen thousand rupees.

Example:-

If Ajay and Ram got 12000 and 21000 commission respectively then Ajay does not need to pay for the TDS as the commission is less than 15000 but Ram will pay 21000 * 3.75 % of his commission in his TDS.

LIC Bonus Rates: LIC announced its bonus in 2016-17 calendars on LIC’s One Time Diamond Jubilee. LIC releases a bonus every September along with LIC Diamond Jubilee. In LIC bonus is a part of the return which is guaranteed to the LIC holders. In this article, we are going to discuss the LIC bonus and its overview. Bonus which we are going to cover in this article is:-LIC One’s Diamond Jubilee Bonus.

• What is the Meaning of a Bonus?
• What are the Types of Bonuses?
• How to Calculate The Bonus Returns?
• How to compare The Diamond Jubilee Bonus with other LIC bonuses or with any other privacy policies company?

What is LIC Bonus, An Overview?

The Actuarial department does an evaluation, and the bonus rates will declare in September every year. There are so many types of bonuses are states in Sept by the Actuarial department:-

1. SRB (Simple Reversionary Bonus)
2. FAB (Final Additional Bonus)
3. LA (Loyalty Bonus)

LIC has a LIC Act in which it shares its 95% of its profit to their policyholders and the remaining 5% with the government as its owner. In the year 2014-15, the regular Bonus of the LIC given to their policyholder is Rs. 34283 crores. And in 2015-16, LIC has paid Rs. 2502 as a surplus to the government up from Rs. 1803 crore.

In 2019-20 Life Insurance Corporation (LIC) has allocated a dividend of Rs. 2697.74 crore to the government for 2019-20 financial years. In those 2019-20 financial years, LIC generates a total surplus of approx Rs. 53955 crore, according to the sources. In 2019-20, Rs. 51257 crore surplus is reserved for the policyholders.

Life Insurance Corporation (LIC) of India, on their 60th anniversary, declared a bonus name as “One Time Diamond Jubilee Bonus.”

The new LIC policies, which open between 01/04/2015 to 31/03/2016, are relevant for the One Time Diamond Jubilee Bonus bonus rates. One Time Diamond Jubilee Bonus is also applicable for the claims by deaths or the claims which maturity period is over (including those discounted within one year of maturity) or surrendered on or after 01/01/2016.

Note: The Bonus is paid according to the policy rules and conditions and depends on the sum assured and policy term. The premium will be added to the account and paid when the maturity period will over.

LIC One Time Diamond Jubilee Bonus (60th Anniversary Bonus)

One-time additional bonus to the simple reversionary bonus, final additional bonus, and loyalty bonus is added on the occasion of LIC 60th Anniversary celebration named Life Insurance Corporation (LIC) of India’s “One Time Diamond Jubilee Bonus.” As per the Life Insurance Corporation of India declaration, they will pay Rs. 5 to Rs. 60 per Rs. 1000 sum assured, depending on the tenor of the policy. The older the policyholder is, the more the jubilee bonus will be offered to them compared to the new policyholders.

Some points to be considered by the LIC of India while offering the Jubilee Bonus to their policyholders:-

1. Policies from 31st March 2016 are eligible for the jubilee bonus and exist on or after the procedures of 1st September 2016.
2. This jubilee bonus will be paid over the regular annual bonus or its profit-sharing annual payout. The holders of money back get the profit of whole life from these profit plans.
3. Diamond Jubilee Bonus can revive the old policies.
4. Policies that lapse as of 31st March 2016 can also revive the eligibility of the Diamond Jubilee Bonus and can get the profit from the bonus offer.
5. Diamond Jubilee Bonus on the 60th Anniversary of LIC benefits over 29 crore individual policyholders and 12 lakhs group policyholders.
6. Depends on the duration of the policy, Diamond Jubilee Bonus can be Rs. 500 for a policyholder with the assured sum of Rs. 100000 to Rs. 6000. It means that older policyholders can get more profits as compared to the new policyholders. And also, the closer the maturity date, the maximum the profit.
7. The bonus will automatically increase by Rs. 500 each for every five-year gap in older policies. E.g., an approach that started in April 2008 will get Rs. 1,000 for every Rs. 1 lakh of the assured sum from 1st April 2008 to 31st March 2016.

LIC Special Bonus

As LIC announced its Diamond Jubilee Bonus on the 60th anniversary, it announces LIC Special Bonus on its 50th anniversary on 1st September 2005. In this bonus, a policyholder can get Rs. 5 to Rs. 50 per thousand sums assured.

The Life Insurance Corporation of India declares seven bonus plans for its 55th-anniversary celebration:-

1. Jeevan Anand,
2. Child Future Plan,
3. Jeevan Tarang,
4. Jeevan Madhur,
5. Jeevan Pramukh,
6. Jeevan Bharti I and
7. Jeevan Shree I.

All these bonus plans range between Rs. 1 to Rs. 6 per thousand sums assured.

These seven bonus plans were declared in 2011-12 under seven of its ‘With Profit Plans’ and Loyalty Additional Bonus (LAB) on the 55th-anniversary celebration.

What is Bonus?

Life insurance companies or organisations distribute their profits to their policyholders in some fixed percentage; this percentage is known as a bonus. Companies distribute various types of bonuses during a financial calendar.

Who is Eligible for the Bonus?

If you think everyone can grab the bonus, then this is not correct, everyone is not eligible for the prize, or you can say that every policyholder is not declared under the dividend. Only those policyholders who come under the eligibility criteria fixed by LIC are eligible for the prize. Types of policies that come under bonus criteria:-

• Participating insurance policies
• Traditional policies
• Endowment policies
• Whole life insurance policies
• Money-back plan policies

Types of Bonuses given by the Insurance Companies

Reversionary Bonus: Percentage rate declaration which applied to the sum assured of the policies. After order, they became a part of the guaranteed benefits of the guidelines. These will be paid at the end of the maturity period only or in case of death. There are three kinds of reversionary bonus:-

1. Simple reversionary bonus: A simple reversionary bonus is calculated on the sum assured and declared on the percentage rate.
2. Compound reversionary bonus: Like a simple reversionary bonus, it is also declared on the percentage rate basis, but they are applied to the sum assured and reversionary bonus already attached to the policy.
3. Special reversionary bonus: A special reversionary bonus is a one-time offer or dividend paid during the term of the policy. This bonus is given if some profit arises and that the same gain is not expected to happen again in the future.

Example: Anniversary bonus like Diamond Jubilee Bonus (2015-16) and Special 50th Anniversary Bonus (2005).

Another bonus added in the special reversionary bonus is called the final additional bonus for its policyholders.

Another kind of bonuses offered:

• Terminal Bonus or Final Bonus: Terminal Bonus is paid at the time of maturity or at the time of claim. After declaring a reversionary Bonus, this is proclaimed as the terminal Bonus or final Bonus if anything is left in profits.
• Loyalty Additional (LA): After completion of the specific period, this one-time payment will be available to the policyholder.
• Guaranteed Addition (GA): There are some plans in which a company is obliged to pay a fixed amount to the policyholder for a set amount of time; this is called a guarantee addition.

Simple Reversionary Bonus

Simple Reversionary Bonus is an assurance bonus declared annually with profits.

It is based on the earnings of the life company’s investment.

It is payable at the end of the maturity period of the policy or after death.

Simple Reversionary Bonus declared based on percentage rate and calculated on the sum assured.

For example, if you hold a policy of Rs 1,00,000 Sum assured and the simple reversionary bonus for the year declared is Rs 50 per thousand sums guaranteed, then your bonus amount is Rs 50 * 1,00,000/1,000, which is Rs 5,000 for this year. Still, you cannot take it annually. This will be finalised at the end of the maturity period or after the death.

Find LIC Bonus by Sending SMS

Type a message: ASKLIC <POLICY NO> BONUS

And send it to 56767855.

* Charges will be applied for the SMS.

How do you find the LIC Bonus Details?

• Visit LIC official website.
• Login to the LIC website
• Select for the policy status

There you can find all the policies and their details accordingly.

How do you Calculate the LIC bonus?

Bonus for the LIC has declared per thousand sums assured.

1. Find your LIC policy by name and table number.
2. Find the row which matches with your term plans and the period of the policy.
3. Bonus rate per thousand corresponds to the term plan.
4. Know your sum assured of the policy you owned.
5. The formula for Bonus Calculation:

Formula = (Sum Assured / 1000)*Bonus Rate

Example: Mr. Sen has taken Jeevan Anand’s plan for 15 years, and the sum assured is Rs. 10 lakhs. Now according to the LIC bonus rate, his bonus rate is 34 per thousand.

Which is Better, LIC Bonus or Private Insurance Company Bonus?

Many companies in the market offer you a bonus, and private companies also declare dividends for with-profit plans.

You can check their plan and compare them with LIC Insurance Plans.

Companies which offers a bonus with profit plans:-

• Kotak Insurance Policies
• ICICI Insurance Policies
• SBI Insurance Policies
• Sahara India Insurance Policies etc.

Reversionary Bonus Rates per 1000 Sum Assured

Group 1

Plan: Whole Life type (Plan 2, 5, 6, 8, 10, 28, 35, 36, 37, 38, 09, 77, 78, 85, 86)

• Term: NA
• 2016-17: 70
• 2015-16:70
• 2014-15:70
• 2013-14:70
• 2012-13:70
• 2011-12:70

Group:2

Plan: Endowment type / Plans 14, 17, 27/

After conversion, 28 after conversion, 34, 39, 40, 41, 42, 50, 79, 80, 81, 84, 87,90,91, 92,95, 101, 102,103, 109, 110 & 121

• Term: <11
• 2016-17:34
• 2015-16:34
• 2014-15:34
• 2013-14:34
• 2012-13:34
• 2011-12:34

Group:2

Plan:Endowment type / Plans 14, 17, 27/

After conversion, 28 after conversion, 34, 39, 40, 41, 42, 50, 79, 80, 81, 84, 87,90,91, 92,95, 101, 102,103, 109, 110 & 121

Term:11 TO 15

2016-17:38

2015-16:38

2014-15:38

2013-14:38

2012-13:38

2011-12:38

Group:2

Plan: Endowment type / Plans 14, 17, 27/

After conversion, 28 after conversion, 34, 39, 40, 41, 42, 50, 79, 80, 81, 84, 87,90,91, 92,95, 101, 102,103, 109, 110 & 121

Term: 16 to 20

2016-17:42

2015-16:42

2014-15:42

2013-14:42

2012-13:42

2011-12:42

Group:2

Plan: Endowment type / Plans 14, 17, 27/

After conversion, 28 after conversion, 34, 39, 40, 41, 42, 50, 79, 80, 81, 84, 87,90,91, 92,95, 101, 102,103, 109, 110 & 121

Term:>20

2016-17:48

2015-16:48

2014-15:48

2013-14:48

2012-13:48

2011-12:48

Group:3

Plan New Endowment Plan814:

Term: 12 to 15

2016-17:38

2015-16:38

2014-15:38

2013-14:NA

2012-13:NA

2011-12:NA

Group:3

Plan New Endowment Plan814

Term:16 to 20

2016-17:42

2015-16:42

2014-15:42

2013-14:NA

2012-13:NA

2011-12:NA

Group:3

Plan: New Endowment Plan814

Term: >20

2016-17:48

2015-16:48

2014-15:48

2013-14:NA

2012-13:NA

2011-12:NA

Group:4

Plan: New Money Back Plans 820 & 821

Term:20

2016-17:39

2015-16:NA

2014-15:39

2013-14:39

2012-13:NA

2011-12:NA

Group:4

Plan: New Money Back Plans 820 & 821

Term:25

2016-17:44

2015-16:NA

2014-15:44

2013-14:44

2012-13:NA

2011-12:NA

Group:5

Plan: New Jeevan Anand Plan 815

Term:

2016-17:

2015-16:

2014-15:

2013-14:

2012-13:

2011-12:

Group:5

Plan: New Jeevan Anand Plan 815

Term:15

2016-17:41

2015-16:41

2014-15:40

2013-14:NA

2012-13:NA

2011-12:NA

Group:5

Plan: New Jeevan Anand Plan 815

Term:16 to 20

2016-17:45

2015-16:45

2014-15:44

2013-14:NA

2012-13:NA

2011-12:NA

Group:5

Plan: New Jeevan Anand Plan 815

Term:>20

2016-17:49

2015-16:49

2014-15:48

2013-14:NA

2012-13:NA

2011-12:NA

Accessing NPS Account and CRA: The National Pension Scheme or NPS is a government scheme to mobilize your earnings to receive a regular income as some pension after you retire. The government launched this scheme under the pension fund regulatory and development authority in 2009. You can use the method by setting up an account.

The government has appointed the NSDL as the central record-keeping agency. They handle all accounts of the new pension scheme. When subscribers open a new PRAN account (Permanent retirement Account), they will get an I-pin and a T-pin.

How to Log in to NPS Online?

• Step 1: Visit the portal of NSDL.
• Step 2: Click on ‘Open your NPS account/ Contribute Online.’
• Step 3: Click on ‘login with PRAN/ I-Pin.’
• Step 4: Click on ‘Password for e NPS.’ Enter the PRAN, DOB, new password, confirm password, and input the captcha.
• Step 5: Click on ‘submit.’
• Step 6: Enter the OTP.
• Step 7: Log in with the new password.

Once you have got a valid PRAN, you can go to the official webpage of NSDL. The first page is the login page. You can go to the separate window they provide if you are an NPS subscriber.

Each customer with a unique PRAN can use it to track their NPS account on the NSDL website through a mobile app or the NPS portal online. The NSDL also gives all the customers a confidential I-pin to maintain the customer’s security. They can use to log in to their NPS account with that number.

Why Should Customers Want to Reset their NPS I-pins?

1. Customers can wish to change their NPS I-pin if they are faced with the following scenarios.
2. Initially, when a person enrolls with the NPS, they will get an I-pin in their registered email account. As soon as they get the mail, they can use the I-pin to log in to their NPS account. As a security measure, the officials want the customers to reset their NPS I-pin in the very beginning.
3. Customers can change their I-pin if they have forgotten the pin.

Steps to Reset NPS I-Pin

As soon as the customer has created an account in the NPS, they will get an I-pin in their registered mail account. They have to log in to their new account using it, and then they can reset it for safety purposes.

• Step 1: Log on to the NSDL website once you have your PRAN (Permanent Retirement Account Number).
• Step 2: There will be a ‘Set or Reset I-Pin’ option on the bottom right corner of the page. You can click on it to open a new page.
• Step 3: You will see banks where you have to fill in the details such as the PRAN, your name, the date of birth (DOB). All the details you enter into the spaces should match with the ones you have filled in your PRN card.
• Step 4: Enter your password or the I-pin.
• Step 5: Re-enter the password if required.
• Step 6: After entering the password, click on ‘generate OTP.’
• Step 7: You will get an OTP on your registered mobile number.
• Step 8: Enter the OTP you got on the portal and finally click on ‘submit.’

NPS subscribers can also reset their password or the I-pin if they have forgotten it; otherwise, the account can get locked. The authorities have made a rule to block the account if they enter their NPS account number consecutively five times to stop unauthorized access.

If it happens, then they have to reset the password by answering the secret question that you had set at the beginning of the creation of your account. If the user is unable to remember the answer to the question as well, you can submit a request to reissue the I-pin.

Steps to Reset Password for NPS if you have Forgotten It

• Step 1: Visit the welcome page for NPS account login on the official site.
• Step 2: A new window will open. Click on the ‘Forgot Password’ link.
• Step 3: A new tab will initiate where you have to input details such as your DOB, PRAN, etc.
• Step 4: Enter a new password on the space for the new password.
• Step 5: Log in to the account using the new password.

What is a T-pin?

A person with the Permanent Retirement Account or PRAN gets a T-pin from the CRA apart from the I-pin.

Advantages of I-pin

1. All I-pin holders can access the CRA system while checking their account details online, such as an address, bank account details, and nominee details for Tier 1 and Tier 2 NPS accounts.
2. All I-pin holders can generate their statement of holding both the Tier 1 and 2 accounts that give them the latest valuation of their total investments.
3. The I-pin holders can also generate their statement for transactions for the last three financial years as well as the invoice for the current financial years for Tier 1 and 2 accounts.
4. The I-pin holders can track their credit for their monthly contributions into their Tier 1 account.
5. If I-pin holders have any grievances, they can register an official complaint against the CRA or the Nodal Office after logging in to the CRA system. Once their complaint is recorded, the system generates a token number, and they can use it to track the status of the complaint later.

Advantages of T-pin

1. T-pin holders can dial the toll-free helpline number 1800222080 using their T-pin number if they have any queries or complaints.
2. T-pin can be useful if the holders need to speak to the NSDL, i.e., the Central Record Keeping Agency for the NPS.
3. The T-pin holder can access the Interactive Voice Response or the IVR system to avail of the services. These include changing T-pin, checking holding details, checking the status of any fund manager schemes, enquiring the details of the last contribution credit, checking the details of the latest withdrawal request, and requesting the transaction statement for the previous three financial years, and checking account details.

Interest Rates of Post Office Small Savings Schemes: Indian Post is one of the most popular postal chains in the country. It is best known for its postal and courier services nationwide. The India Post controls the overall postal chain of the country, and it also provides various saving schemes for the public. With the rapid advancements in the communication fields and the inventions of the mobile phone, e-mails, and texts, the Indian post saw a downfall in the past years. But, the banking and the depository services of the India post became popular among the public for their attractive interest rates and yields.

In recent times, managing funds and finances have become the most challenging for individuals. Most people do not have any idea about investments and saving schemes, making it difficult for them to save money for their future. To increase investment activities and inculcate saving habits in Indians, the Government of India introduced various saving schemes under the Postal services.

The several savings and depository services available for the public under India Post are called Post Office Saving Schemes. These were introduced to increasing investment activities among the public, thereby providing them with high yields. The depository services are provided by every branch of India post across the country.

This article will discuss various post-saving bank schemes, their interest rates, benefits and other terms related to Post Office Savings Schemes.

What are Saving Schemes?

Savings schemes can be defined as the instruments that help individuals manage their finances and provide investment opportunities to help them achieve their financial goals over a given period. The Government introduced these savings schemes to inculcate saving discipline among individuals and to provide risk-free investment opportunities. The savings earned from these schemes can be used for different purposes such as children’s education, marriage or other emergencies.

Types of Post Office Saving Schemes

The India Post provides various saving schemes as per the requirement of the public, and these schemes are both short-term and long-term. They provide an easy investment opportunity to the public. Presently, the Post Office provides nine different types of Postal Saving Schemes that cater to the needs of every individual. Let us discuss each Post Office Saving Scheme in detail.

• Post Office Savings Account: This is the first and the most common saving scheme under the Post Bank. This account is just like other savings bank accounts, but the only thing that separates it from the regular savings bank account is its holding and operating with a Post Office. Like other savings bank accounts, these accounts can also be transferred from one Post office to another. The interest rate on these savings account is also 4% per annum. The Post Office Savings Account can be opened just by depositing ₹20, but one has to maintain a minimum balance of ₹50 in the account.
• Post Office Monthly Income Scheme: Post Office Monthly Income Scheme or POMIS is another saving scheme offered by the post office that assures a guaranteed monthly income on a small investment made by the investor. Any Indian resident can open an MIS account with the post office. Even a minor can also open an MIS account, and if the minor is above 10 years of age, He/she can even operate the account. One can open an MIS account with a minimum amount of ₹1,500 and a maximum of ₹4,50,000 individually. But, if one opens an MIS account jointly, the maximum amount of deposit becomes 9 lakhs. The Post office offers an interest rate of 6.6% per annum under the POMIS with a maturity period of 5 years. POMIS scheme also offers liquidity of investment within a year. However, the bank charges 2% as a penalty on the investment if it is withdrawn between 1-3 years.
• Post Office Recurring Deposit Account: Recurring Deposit Account is another saving and investment instrument offered by the post office, where a person deposits a certain sum at monthly intervals for over 5 years. A recurring deposit account yields a 5.8% interest per annum that is compounded quarterly. If a person fails to pay the monthly instalment of nay month, he/she can be charged with a late fee of 5 paise for every 5 rupees. Recurring deposit accounts allow a 50% withdrawal after 1 year of investment.
• Post Office Time Deposit Scheme: It is another saving scheme offered by the Post Bank. Under this scheme, a person can invest a lump sum for 1, 2, 3, and 5 years of period. The time deposit yield different rates of interest depending on the tenure of the investment. For 1, 2, and 3 years of time deposit, the interest rate is 5.5%, but for 5 years, it is 6.7%. The minimum investment in a time deposit is ₹200, and there is no upper limit. The best feature of a time deposit is that a person can hold as many time deposit account as he/she wants. If a person invests for 5 years in a time deposit, he/she can claim deduction under section 80C of the Income Tax Act.
• Kisan Vikash Patra: Kisan Vikash Patra is another saving scheme that provides an annual interest rate of 6.9% on investment. Any citizen of India can invest in Kisan Vikash Patra with a minimum investment of ₹1,000. The amount invested under the saving scheme doubles every 10 years and 4 months. The Kisan Vikash Scheme are easily transferrable and can also be endorsed to third parties. The scheme offers the liquidity of cash after 2.5 years, starting from the date of investment.
• Senior Citizen Savings Scheme: The Senior Citizen Saving Scheme or SCSS is an investment scheme under the postal services offered to citizens above the age of 60 years. A person who is 55 years of age can also benefit from the scheme if h/she has taken voluntary retirement. The investment amount under this scheme can be only in multiples of 1000, and the maximum investment can be ₹15 lakhs. The account under the scheme can also be held and operated jointly. The Scheme provides an annual interest of 7.4% payable on the 1 day of each quarter. The scheme also facilitates premature withdrawals after a year and with a penalty of 1.5% of the investment.
• Public Provident Fund: Public Provident Fund is a Long term investment instrument offered by the Post bank. The maturity period of the investment is 15 years. The scheme offers 7.1% interest per annum compounded yearly. The minimum investment for the scheme is ₹500, and the maximum is ₹1.5 lakh per year. The Scheme allows one time or monthly deposit of the investment amount.
• National Savings Certificate: National Savings Certificate or NSC is an investment policy with a maturity period of 5 years and offers a yearly interest of 6.8%. The interest under the scheme is compounded semi-annually. A person can start investing in NSC with a minimum of ₹500, and there is no maximum limit to the investment. The certificates acquired under NSC can be used as security against bank loans.
• Sukanya Samriddhi Scheme: It is one of the most benefitting schemes under the Postal services. It was introduced by the Government of India to help girl children. The saving scheme offers the highest interest rate, which is 7.6% per annum. The minimum investment is ₹1,000, and the maximum investment is ₹1.5 lakhs per year. The investment amount shall be deposited yearly or monthly for 15 years, and after 15 years, the investment will continue to earn interest till maturity. The maturity period of the scheme is 21 years from the date of opening.

Comparison of Interest Rates And Taxability of Post Office Savings Scheme

In the above paragraphs, we discussed savings schemes and the types of saving schemes offered by Post Offices. Now let us compare the interest rates of these saving schemes and discuss their taxability.

Name Of The Scheme	Interest Rates	Taxability
Post Office Savings Account	4.0% per annum, compounded annually	Taxable amount is exempted up to ₹50,000 on the total interest.
Post Office Monthly Income Scheme	6.6% per annum, payable monthly	The interest earned under the scheme is fully taxable.
Post Office Recurring Deposit	5.8% per annum, compounded quarterly	TDS is not applicable on the interest earned under the scheme, But interest is taxable as per an individual’s tax slab.
Post Office Time Deposit Scheme (5 years Tenure)	6.7% per annum	Tax savings up to ₹1.5 lakhs per annum, under section 80 C on a 5-year term deposit.
Kisan Vikash Patra	6.9% per annum, compounded annually	TDS is applicable on the interest earned, and the interest amount is exempted on maturity.
Senior Citizen Savings Scheme	7.4% per annum, compounded annually	Tax savings up to ₹1.5 lakhs per annum under section 80 C and TDS savings up to ₹50,000 on the total interest earned.
Public Provident Fund	7.1% per annum, compounded annually	A maximum deposit of 1.5 lakh is exempted under the Income-tax.
National Savings Certificate	6.8% per annum, compounded half-yearly	Tax relaxation up to ₹1.5 lakhs per annum.
Sukanya Samriddhi Scheme	7.6% per annum, compounded annually	A deposit of up to 1.5 lakhs is exempted. The interest earned on maturity is tax-free.

Importance of Post Office Savings Schemes

Post office savings schemes are essential for an individual as well as the country’s economy for the following reasons:

• The first importance is that these savings schemes are risk-free and reliable as the Government backs them. These savings schemes offer the best and most profitable investment options to an individual to mobilise their funds.
• Secondly, these savings schemes offer the most attractive and reasonable rates of return to the investors. The rates of these schemes are revised every 3 months by the Ministry of Finances.
• The Savings Schemes under India Post are easy to open with very minimal documentation and quick enrolment.
• The savings schemes are designed for every individual across the different economic strata of the country.
• The post office savings scheme offer high tax benefits to the investors, which make it more attractive.