What is EEE or EET or ETT in Terms of Taxation?

What do the three characters meanings?
I understand these words are very untidy to you but comprise so much significance in the taxation world. So let’s try to understand these expressions.

• “E” means Exempt
• “T” means Taxable.
• “T” means Taxable.

Words laid down above appears to be higgledy-piggledy for non-professionals, but for all taxpayers it is must to understand these words before investing in saving instruments like PPF, NSC, FD, Post Saving account.

Almost all instruments fall under the following equations.

• EEE (Exempt – Exempt – Exempt)
• EET (Exempt – Exempt – Taxable)
• ETE (Exempt – Taxable – Exempt)
• ETT (Exempt – Taxable – Taxable)

The above equations are passed in three stages when someone invest in investment instruments.

Stages for tax benefit and taxation

1)   First Stage  -   Investment Stage

• The moment - when somebody practically makes an investment.

Almost all Investments are exempt from tax  i.e. First E for EEE, EET.

2) Second Stage – Earnings Stage

• The moment – When you get benefit (interest, accrued interest etc.) on your investment i.e First Stage

But the  second stage may be taxable or exempt i.e. Second E may be T or E
For example :

• Interest on  National Savings Certificate (NSC) is taxable
• Interest on Provident Fund (PF) or Voluntary Provident Fund (VPF) is not taxable.

3)   Third Stage -  Withdrawal Stage

• The moment – when you withdraw the whole or part of your investment with benefit i.e. interest or accrued interest.

Now same as second stage may be taxable or not i.e third stage may be E (exempt) or T (Taxable)

For example

PPF is fall under EEE (Exempt – Exempt – Exempt).

See all tax saving Schemes

Now lets understand with saving instruments and tax saving schemes in which equation they fall.

Public Provident Fund (PPF)

• Investment: Tax-deductible
• Accumulation: Tax-free
• Withdrawal: Tax-free

Stages :  Exempt – Exempt – Exempt or EEE regime is followed for PPF.

National Savings Certificate (NSC)

• Investment: Tax-deductible
• Accumulation: Taxable
• Withdrawal: Tax-free

Stages :  Exempt – Taxed – Exempt or ETE regime is followed for NSC.

Provident Fund (PF)

• Investment: Tax-deductible
• Accumulation: Tax-free
• Withdrawal: Tax-free

Stages :  Exempt – Exempt – Exempt or EEE regime is followed for PF and VPF.

Tax Saving Fixed Deposits

• Investment: Tax-deductible
• Accumulation: Taxable
• Withdrawal: Tax-free

Stages :  Exempt – Taxed – Exempt or ETE regime is followed for these FDs.

Related posts:

1. Direct Tax Code : Tax on Saving Withdrawals : EEE would be EET.
2. Public Provident Fund (PPF)
3. Income Tax Exemption Limit Increased | Union Budget 2009 Taxation Highlights
4. Documents Kept in Record in Support of the Income Tax Return
5. Save Maximum Tax on Salary by Simple Salary Framework

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