Saturday, December 13, 2014

Does Interest on NRE Fixed Deposit is Taxable?

In short, No, interest earned on NRE fixed depsosit is tax free in India. If you are an India working abroad and earning in foreign currency, you have couple of more investment options available than to a resident customer. If you keep your money or some part of your money in India, NRE fixed deposit is the best option for you. Fixed deposits are most popular saving and investment method for millions of Indians from long long time. One reason of this is because it provides safety of principle amount and interest rates were very high compared to developed economy. You can easily gain 9% of quarterly compounded interest rate on a FD in India, but most of the Indian makes a mistake while thinking that FD provides high interest rate. What they don't consider is taxation. Whatever interest you earn on fixed deposit is taxable in India, and that too with 20% if you don't submit your PAN card, otherwise FD interest will become part of your taxable income and clubbed together while deciding which income tax slab you are on. NRE fixed deposit excel here because you don't need to pay any tax on interest earned. This is the single most reason I recommend NRI to put their money on NRE fixed deposit. If you add taxation 9% interest rate easily reduced to 6 to 7% depending upon your income tax slab, but if you don't have to pay any tax then what you see is what you get.  So to answer the question, Interest rates on NRE fixed deposit is not taxable. For those who are new to NRE deposit, let's learn more. 

Friday, November 21, 2014

Difference between Public Provident Fund and Employee Provident Fund - PPF vs EPF

People often mistook Public Provident Fund or PPF for Employee Provident Fund or EPF, though both are provident fund and backed by government of India, they are independent with each other. Main difference between PPF and EPF is that former is totally controlled by you and only you can make contribution on that account, on the other hand EPF is for both you and employer to contribute money. If you have seen your payslip closely, you will find out that your employee deposit certain amount of money, proportional to your salary to your EPF account. In India, most company count EPF contribution as part of Employees total compensation or package, so you feel that it's more or less your contribution but that's not true. You cannot withdraw EPF money while being on the same company for certain period of time, known as locking period, but when you change job you will be given option whether to withdraw your EPF money or transfer it to your next employer. Many people prefer to just take the money when they change the job to avoid hassle of transferring of EPF account. Coming back to PPF account, this is something you need to open, your employer has nothing to do with that. People open Public Provident Fund account with two main purpose, first tax saving and second long term investment because PPF provides 8.5% per annum (8.7% for year 2014 and 2015) and more importantly both contribution and maturity amount is tax free, unlike tax saving fixed deposit, where only contribution is subtracted from your taxable income but maturity amount is taxed. Apart from the basic fact that PPF is your personal provident fund account and only you can contribute there, and EPF contribution is made by your employer and you, there are couple of other differences which we will explore in this article.  By the way, you can also check your EPF balance online now days.

Friday, November 14, 2014

Can we Invest more than one lakh in PPF Account?

TL;DR : You can now invest more than 1 lakh rupees on your PPF account, thanks to increased limit in 2014 budget. Earlier this limit was only 1 lakh but now it is raised to 1.5 lakh and so without doing any extra trick, as shown in this article, you can now invest more than one lakh in your personal public provident fund account.

I wrote this post couple of months ago but couldn't able to post. I know things has been changed from them to now and that's why I have added opening paragraph with latest information, I thought to share how it was before, because it still possible that people will ask questions like, Can we invest more than 1.5 lakh in PPF account :-) .

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