For safe and guarented return, common people often prefer to invest in Post Office. Post Office offers various schemes for different purposes. There are some schemes which will help you to save tax, while some charge tax amount. When Post Office charge for tax, what are the rules for tax deduction? Let’s know about it.
Tax deduction in Post Office schemes
These schemes are quite popular as safe investments. They offer features like government guarantees and fixed returns. However, it’s important to note that these schemes are not tax-free. Some schemes require tax deducted at source (TDS) when interest exceeds a certain threshold. Knowing the rules in advance can help avoid unexpected interest deductions.
These schemes can charge tax
TDS is levied on post office time deposits, recurring deposits, and monthly income schemes. If the interest earned on these schemes exceeds Rs 40,000 (Rs 50,000 for senior citizens) in a financial year, TDS will be deducted at the rate of 10%. If you haven’t provided a PAN, this rate will increase to 20%. TDS is not levied on basic Post Office Savings Accounts, but if the interest earned in a year exceeds Rs 3,500 (individual account) or Rs 7,000 (joint account), tax is applicable. TDS is also not levied on PPF, Sukanya Samriddhi Yojana, and NSC. However, different tax rules may apply to their maturity proceeds.
When you have to pay taxes
If your total income is below the tax limit, you can avoid TDS by filing Form 15G (for those under 60) or Form 15H (for senior citizens). Updating your PAN and submitting timely declarations is essential. If excess TDS has been deducted, a refund can be claimed when filing your income tax return. Small investors, especially retirees who receive regular interest from post office schemes, should keep an eye on the annual interest rate. With tax planning, post office investments can still remain a safe and hassle-free option.