KNOW ABOUT INVESTMENTS WITH EXEMPT-EXEMPT-EXEMPT (EEE) TAX STATUS

Taxation of the income earned on investments is an important factor to consider while selecting the right financial instrument.

If the income either as capital gains or interest income of an investment is taxable, it gets added to one's income. Subsequently, there is a tax liability for you to meet on the income earned. Effectively, the post-tax income in your investment will be lower than the nominal return. The tax has to be paid based on your income tax slab.

There are three stages of taxation in any investment - the investment stage, accumulation stage and the maturity stage. If there is a tax benefit in the first stage and no incidence of tax in the second stage (growth period) and in the third stage which is the maturity stage, then it means the investment has E-E-E status or exempt-exempt in tax parlance.

At the time of making investments, there are tax benefits on some investments. Similarly, some investments generate tax-free income. Some of the popular tax-exempt income are agriculture income and interest earned in PPF and are covered under the Section 10 of the Income Tax Act.

Let's visit some of these E-E-E incomes and investments. Even though there is no tax liability in some of the investments, it is always better to disclose them while filing your income tax return.