NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Debt Products
Under the Income-tax Act as applicable to resident individuals, interest earned on a Public Provident Fund (PPF) account is treated in which manner?
PPF interest is exempt from income tax for the account holder, and the maturity proceeds are also exempt. It is not taxed annually at slab rates, nor taxed only on maturity, and no TDS applies, which is why PPF is called an EEE-type product.
- ATaxable at slab rates every year as income from other sources
- BExempt from tax, subject to the rules of the schemeCorrect
- CSubject to TDS at 10% and then taxable at slab rates
- DTaxable only at the time of maturity
Explanation
Interest credited on a PPF account is exempt in the hands of the account holder under the scheme rules, and the maturity amount is also exempt. It is not taxed yearly or at maturity, and no TDS is deducted on it.
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