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What is EEE in income tax? 5 tax-free investment options to become crorepat

A wise investor makes informed investment decisions and places money in Exempt-Exempt-Exempt (EEE)-classified plans that offer both tax-free and tax-saving benefits.

  • 20,518 Views | Updated on: Mar 20, 2024

Today, due to the significant societal changes, we no longer feel the need to be coerced by others into making investments or accumulating money for a secure future.

In actuality, young people nowadays are very worried about saving and tax savings investments for a future free of risk. They think that making money while you sleep can be done through investments and passive income. However, as a shareholder, you should look for investment possibilities that not only lower your tax liability but also generate fully taxable income at maturity.

What is EEE in Income Tax?

EEE - Exempt Exempt Exempt category is tax exemptions on investment, interest/return and maturity. Assume that you want to invest a certain amount in a tax-saving investment strategy. In this case, your initial investment is tax-free, your salary portion invested in the strategy is not subject to tax, and your investment is eligible for a deduction.

Your second benefit is gaining interest in your investment. Interest earned during the investing phase is tax-free in its entirety.

The third and final exemption under the EEE scheme means that at the time of maturity, neither your cumulative interest nor your principal amount will be subject to taxation.

A wise investor makes informed investment decisions and places money in EEE-classified plans that offer both tax-free and tax-saving benefits.

5 tax-free investment options to become crorepati

Public Provident Fund (PPF)

The Public Provident Fund is the only investment strategy that has been successful for decades (PPF). This investment strategy continues to be popular today. As a result of its compounding strength, it is a risk-free investing strategy with favourable returns.

The central government supports the program, which provides significant risk-free returns. PPF accounts can be opened at a post office or a bank. However, people who intend to invest in the programme should keep in mind that there is a 15-year initial lock-in term. PPF belongs to the Exempt-Exempt-Exempt (EEE) classification. After the initial 15 years, there is an opportunity to prolong the account’s tenure in blocks of five years.

Sukanya Samriddhi Yojana

As a part of the government of India’s “Beti Bachao Beti Bachao” initiative, the Sukanya Samriddhi Yojana was introduced. To assist the guardian of a girl child in meeting their financial needs, such as funding for education and marriage, the investment plan may be opened in the girl’s name. 7.6% annual interest is the current rate of interest offered by the plan. Sukanya Samriddhi Yojana can be started at any time following the birth of a girl child and continuing until she turns 10 with a minimum contribution of ₹250.

Unit Linked Insurance Plans (ULIPs)

These long-term investment life insurance plans offer a variety of investment features. Goal safety, automatic portfolio management, and multi-fund allocation are some of the most distinctive ULIP characteristics.
Most ULIPs offer 5 to 9 fund alternatives with different equity and debt asset allocations. A Ulip may last for up to 20 years, but the lock-in term is only five years. The fund value is tax-free whether you exit the policy (which is permitted after 5 years) or when it matures. Regardless of the holding period, switching between the fund’s alternatives is tax-free.

Equity Linked Savings Scheme (ELSS)

One should be aware that while capital gains from ELSS up to ₹1 lakh in a financial year are tax-free, capital gains exceeding ₹1 lakh are subject to long-term capital gains (LTCG) tax of 10%. This is important information for anyone considering participating in equity-linked savings schemes.

Employee Provident Fund (EPF)

Employee Provident Fund, sometimes known as EPF, is a retirement programme provided by the government that is exempt from all federal income taxes (EEE). The employer’s portion is not eligible for a tax break under Section 80C, but the employee’s contributions are up to a ceiling of ₹1.5 lakh annually. Both employee and employer shares are eligible for interest, which is declared annually and is not subject to tax.

Wrapping Up

As you can see, disciplined investing in straightforward tax savings products like PPF, ULIP, and EPF can easily safeguard your financial future instead of experimenting with exotic investment possibilities. As a result, if you want to save money on taxes while still building long-term wealth, you should think seriously about making these tax-saving investments.

Key takeaways

    5 tax-free investment options to become a crorepati.

  • Public Provident Fund (PPF)
  • Sukanya Samriddhi Yojana
  • Unit Linked Insurance Plans (ULIPs)
  • Equity Linked Savings Scheme (ELSS)
  • Employee Provident Fund (EPF)

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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