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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Debt Products

A resident individual wants to know whether interest on a Public Provident Fund (PPF) account is taxable. Which statement is correct under the current framework for a PPF account within the prescribed limits?

Interest on a PPF account within the prescribed limits is exempt from income tax in the hands of the account holder, and the maturity proceeds are also exempt. It is not taxed yearly, at maturity, or subject to TDS.

  1. AInterest is taxable under Income from Other Sources every year
  2. BInterest is exempt in the hands of the account holderCorrect
  3. CInterest is taxed only at maturity as capital gains
  4. DInterest is taxed at a flat 10% with TDS

Explanation

PPF falls in the exempt-exempt-exempt category: interest credited to the account within prescribed limits is exempt, as is the maturity amount. It is not taxed yearly or at maturity, and no TDS is deducted.

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