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Post office savings

vasanthkumar (ACCOUNTANT) (30 Points)

24 April 2014

Dear

Can you explain me the tax benefit in Post Office Savings. under section 80c with eg.?.. If i invest Rs.2000 monthly

Thanks

Vasanth

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Rahul Patel (Accounts Executive) (94 Points)
Replied 24 April 2014

Under Sec.80 C, an assessee can claim deduction to the extent of 1 Lakh rupees, if he Invest in the below mentioned qualifying investments:

- Life Insurance Premium

- Contribution to Statutory Provident fund & recognized provident fund

- Contribution towards 15 year Public Provident Fund.

- Contribution towards an approved superannuity fund

- Subscripttion to NSC

- Contribution towards ULIP

- Contribution towards notified units of Mutual Fund or UTI

- Amount deposited in five years time deposit scheme in Post Office or any through any other scheme framed by Central Govt.

and many more points are also there.

So you can claim deduction by investing in any other option as well, considering the limit of Rs. 1 lakh.

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JIBIN THOMAS BABU (CA FINAL STUDENT) (147 Points)
Replied 24 April 2014

5 Year Post Office Time Deposit (POTD):

They are similar to bank fixed deposits. POTD are available for varying time duration like 1-year, 2 years, 3 years and 5 years. However, only 5-Year POTD qualifies for tax saving u/s 80C.

Interest is compounded quarterly for 1, 2, 3 & 5 years TD account respectively. The interest is entirely taxable.

The maximum limit of Rs 1 lac can be deducted from your income under Section 80C. However, there is a provision for additional deduction solely reserved for Infrastructure Bonds.

For example if your salary is Rs 3 lacs per annum and you are investing Rs 24,000 (Rs.2000*12 months) in 80C(ie. POTD) then your taxable income will be Rs. 2,76,000 (Rs 3 lacs - Rs 24,000 only).

Even if you invest more than 1 lac in 80C, you can show only 1 lac as investment in 80C .