Understanding the Terms EEE, EET, ETE for Tax Liability?

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These are three terms which are generally used for investment made for taxation purposes. Individuals often make investment with the intention to save tax and also capital appreciation on the investment. 

On every investment you make for tax purpose, when interest or return is earned on the investment and when you withdraw the lump sum, these are the three stages where tax is applicable.

Understanding the Terms EEE, EET, ETE for Tax Liability?

Exempt, Exempt, Exempt 

Investment made under Exempt, Exempt, Exempt ( EEE) is one of the best tax saving instrument. First E implies an exemption on the amount invested on the product. Second E implies an exemption on interest or any income earned under the product. Third implies there is an exemption on the total income earned from the investment.

As of now investment such as Public Provident Fund and Employees Provident Fund fall under this category. 

Exempt, Exempt, Taxed

EET, the first E indicates that the original investment is exempt from tax. The second E denotes that returns or income or accumulation on the investment are not taxed. Here T, indicates that any maturity amount or withdrawals are subject to tax depending on the tax slab of the individual.

Investments which fall under EET are Unit Linked Pension Plans, Pension plans, National pension Schemes

Exempt, Taxed, Exempt

Bank Tax saving fixed deposits and NSCs are best example for this, where tax is exempt on amount you invest as FD, the interest is taxed and at the Third E, indicates that principal amount is tax free.

So before investing for tax purpose one needs to understand all these terms and make a wise decisions based on tax slabs which he falls.


Read more about: income tax, taxation
Story first published: Saturday, January 31, 2015, 11:53 [IST]
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