EEE EET ETE explained

There are 3 ways Govt. taxes the monies invested by public at various stages of investment.
When the money is invested it goes through three stages, which are -

• Contribution to an investment scheme.
• Accumulation of interest.
• Withdrawal stage, when the lump sum amount (sum of money invested and accrued interest) is withdrawn.

How does EEE relate to these stages?

EEE stands for Exempt, Exempt, Exempt which means -

• First exempt means that the amount invested will be eligible for deduction under some section (As exp 80C) subject to the total exemption limit. The invested amount will be deducted from the total taxable income of the individual.
• Second Exempt means the accrued interest will not be added to the total income and will not be taxed. Thus in case of second exempt interest earned is not taxed.
• Third exempt means the income from the investment, at the time it is withdrawn, would be tax free.

As of now EPF, PPF, SSY, Life Insurance Policies, ELSS comes under EEE.

How does ETE relate to these stages?

ETE stands for Exempt, Taxed, Exempt which means -

• First exempt means that the amount invested will be eligible for deduction under some section (As exp 80C) subject to the total exemption limit. The invested amount will be deducted from the total taxable income of the individual.
• Taxed means the accrued interest will be taxed.
• Third exempt means the income from the investment, at the time it is withdrawn, would be tax free.

Some of the investments which can be categorized under ETE would be Tax Saver FDs, NSC.

How does EET relate to these stages?

EET stands for Exempt, Exempt, Taxed which means -

• First exempt means that the amount invested will be eligible for deduction under some section (As exp 80C) subject to the total exemption limit. The invested amount will be deducted from the total taxable income of the individual.
• Second Exempt means the accrued interest will not be added to the total income and will not be taxed. Thus in case of second exempt interest earned is not taxed.
• Taxed means the income from the investment (Principal + Accrued Interest), at the time it is withdrawn, would be taxed.

Some of the investments which can be categorized under EET would be National Pension Scheme(NPS), Pension Plans.

There are other similar terms too like TTE (Fixed deposits), TEE (Stocks and Equity Funds if kept for more than 3 years).

That's all for this topic EEE EET ETE explained. If you have any doubt or any suggestions to make please drop a comment. Thanks!

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