The taxation of virtual or digital assets, such as cryptocurrencies, varies by jurisdiction. In general, virtual assets that are classified as property, such as Bitcoin, are subject to capital gains tax when they are sold or exchanged. This means that if an individual purchases a virtual asset at a lower price and then sells it at a higher price, the difference in value is subject to capital gains tax.
Overview:
The Public Provident Fund (PPF) is a long-term savings instrument established by the Central Government. It offers tax benefits on contributions as well as withdrawals after the lock-in period. This scheme came into force on July 1, 1968, and is backed by the government with the objective of providing old-age income security to the self-employed and those working in the unorganized sector. Though the scheme is voluntary, assured returns and income-tax benefits have fuelled its popularity. The primary objective of saving in the PPF account is to avail tax deductions on deposits, guaranteed returns on investment, and tax-free withdrawal on maturity. Savings in this product are completely risk-free because of government backing.
Key Features of a PPF Account:
The capital in a PPF account is completely protected as the scheme is backed by the Government of India, making it fully risk-free with guaranteed returns. The PPF account is however not inflation protected, which means whenever inflation is above the latest guaranteed interest rate, the deposit earns no real returns. However, when the inflation rate is below the guaranteed rate, it does manage a positive real rate of return. For Example; If the Inflation rate is 7% and the PPF Interest rate is also 7%, then our Investment earns no real returns.
Interest rates are aligned with G-sec rates of similar maturity, with a spread of 0.25 percent. The government has decided to review the PPF rates quarterly. Interest on the PPF balance is calculated every month and the amount is credited to the PPF account at the end of every financial year. Each month, the interest amount is calculated on the lowest PPF balance in the account after the 5th of every month to the last day of the month. Hence, PPF investors are advised to make contributions to their PPF account before the 5th of each month. For the fourth quarter of FY 2020-21, the rate has been set at 7.1 percent compounded annually.
The PPF is liquid, despite the 15-year lock-in stipulated with this account. Liquidity is offered in the form of loans against the PPF. However, the loan will only be granted if it is taken at any time from the beginning of 3rd year till the end of the 6th year from the date of activation of the account. The maximum loan amount is limited to 25% of the PPF balance at the end of the 2nd year or the year preceding the year in which the loan is being applied. You will have to repay the loan in 36 months.
A PPF account has a lock-in period of 15 years on investment, before which funds cannot be withdrawn completely. This tenure can be extended by 5 years at the end of the actual lock-in period. Premature withdrawals are allowed but only in case of emergencies subject to the condition that “after the sixth year, you can withdraw up to 50% of the balance at the end of the fourth year, or the immediately preceding year, whichever is lower”.
You must contribute at least Rs 500 and at most Rs 1.5 lakh in your PPF account in a year. The minimum investment of Rs 500 has to be maintained even for accounts extended beyond 15 years. If you don’t put in a minimum of Rs 500 a year, the account becomes dormant and Rs 50 penalty will be charged for reactivating a dormant account. If you put in more than Rs 1.5 lakh in a year, the excess amount, even if credited by mistake, will not earn any interest. The maximum limit of Rs 1.5 lakh per year includes the contribution in PPF accounts in the names of minor children.
The scheme has exempt-exempt-exempt (EEE) status, where the deposits, the interest earned as well as the maturity amount are tax-free. The sum invested in the PPF account is eligible for tax deduction under Section 80C subject to a maximum of Rs 1.5 lakh in a financial year. On maturity, the entire amount including the interest is tax-free.
Open a PPF account in the name of your spouse or child to gain additional tax benefits. As per tax laws, if money gifted to a spouse is invested, income from the investment is clubbed with that of the giver. Since PPF income is tax-free, it does not push up the tax liability of the giver. So one can invest up to Rs 1.5 lakh a year in this tax-free haven.
Deductions under chapter 6 of the Income Tax Act in India refer to the various deductions that taxpayers can claim from their taxable income. These deductions are available under various sections of the Income Tax Act and are meant to encourage certain types of investments and expenditures that are considered to be beneficial for the economy or society. Here are some of the common key deductions available under chapter 6 of the Income Tax Act:
It’s worth noting that the above-mentioned deductions are subject to certain conditions and restrictions, and the specific deductions and the amount of deductions available may vary depending on the specific section and the taxpayer’s personal circumstances. The deductions under chapter 6 of the Income Tax Act are meant to provide relief to taxpayers and to encourage certain types of investments and expenditures that are deemed to be beneficial for the economy or society.
Sukanya Samriddhi Scheme is a government-backed savings scheme in India that is specifically targeted towards the girl child. The scheme was launched by the Indian government in 2015 as part of the “Beti Bachao, Beti Padhao” campaign, which aims to address the issue of the declining child sex ratio in the country. The scheme is aimed at providing a secure future for the girl child and encouraging parents to invest in their daughter’s education and marriage expenses.
The scheme is open to any individual who has a girl child aged below 10 years. The account can be opened in any post office or authorized banks across India. The minimum deposit required to open the account is INR 1000 and the maximum deposit is INR 1.5 Lakhs per year. The account can be opened in the name of the girl child, and it will remain operational for 21 years from the date of opening. The account can be transferred from one bank or post office to another.
The interest rate for the scheme is determined by the government and is subject to change from time to time. The interest is compounded annually. The deposit made in the account is eligible for tax benefit under Section 80C of the Income Tax Act, 1961. The maturity proceeds of the scheme are also tax-free.
The scheme also offers a partial withdrawal facility after the completion of 5 years from the date of opening of the account. The withdrawal can be made only for the girl child’s higher education or marriage.
Sukanya Samriddhi Scheme is a long-term investment option that can provide a secure future for the girl child. It is a great way for parents to start saving for their daughter’s education and marriage expenses at an early age. The scheme also has a number of tax benefits, which makes it an attractive investment option. It is also a good option for those who are looking for a low-risk, fixed-return investment.
However, it is important to note that the scheme is only for the girl child and the account can only be opened before the girl child turns 10 years old. The scheme also has a lock-in period of 21 years and there are certain restrictions on withdrawals. It is also important to keep in mind that the interest rate for the scheme is determined by the government and is subject to change from time to time.
Overall, Sukanya Samriddhi Scheme can be a great investment option for parents who want to save for their daughter’s education and marriage expenses. The scheme offers a number of benefits and can provide a secure future for the girl child. It is important to understand the terms and conditions of the scheme and the restrictions on withdrawals before investing in the scheme. Consulting with financial experts can help understand the scheme better and make an informed decision.