NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Debt Products
Under the Income-tax Act as applicable to a resident individual, interest earned on a Public Provident Fund (PPF) account is treated as:
Interest earned on a PPF account is fully exempt from income tax for the account holder, and the maturity amount is also exempt. It is not taxed yearly at slab rates, at withdrawal, or at a flat rate, which makes PPF an EEE-type product.
- AFully exempt from income taxCorrect
- BTaxable at slab rates every year
- CTaxable only at the time of withdrawal
- DTaxable at a flat 10% rate
Explanation
Interest credited on a PPF account is exempt in the hands of the account holder, subject to the rules of the scheme. Maturity proceeds are also exempt. Hence treating it as taxable at slab rates or at withdrawal is incorrect.
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