Sukanya Samriddhi Yojana, PPF, Bank FD: How is interest income taxed?


For those investors who want to make safe investments irrespective of not so lucrative returns, bank fixed deposit (FD), Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY) and similar other small savings schemes that offer guaranteed returns are their solutions. However, it is crucial to know the amount of tax that you will have to pay on income generated from these investments. Not all investments that qualify for tax deduction under Section 80C enjoy EEE status for income tax purposes.

What is EEE?

EEE stands for exempt, exempt, exempt. Here, the first exempt means that your investment is allowed for a deduction. So, you don’t have to pay tax on part of the salary that equals the invested amount. Similarly, the second exemption implies that you don’t have to pay any tax on the returns earned during the accumulation phase. The third and final exempt means that your income from the investment would be tax-free in your hands at the time of withdrawal.


EEE status is generally enjoyed by long-term investment vehicles, such as Public Provident Fund and Employees Provident Fund.

Let’s take a look at how the interest income on different investments taxed.

How is interest on bank FD taxed?


Interest income from a bank fixed deposit is fully taxable. Bank charges 10% TDS on the interest generated on the investment made in FD.

How is interest in PPF taxed?

PPF qualifies for income tax deduction under section 80C of the Income Tax Act. There is no charge on the interest generated from the investment even after maturity.


How is interest in Sukanya Samriddhi Yojana taxed?

Just like PPF, the Sukanya Samriddhi Yojana, a special investment scheme by the government for the girl child, enjoys EEE status. The investments under SSY qualify for tax deduction under Section 80C.

Bank FD rates


Fixed deposits are a safe investment option that guarantees consistent interest rates, and no market-related risks, with income tax deductions. Top banks in India generally offer 5.4-5.5% interest rates on a fixed deposit of the same period. SBI FD rates vary from 2.9% to 5.4 for different tenures.

Interest rates on small savings schemes including SSY nd PPF

The Centre has kept interest rates on small savings schemes, including PPF and SSY, unchanged for the second quarter. The finance ministry notification read: “The rates of interest on various small savings schemes for the second quarter of the financial year 2021-22 starting from July 1, 2021, and ending on September 30, 2021, shall remain unchanged from the current rates applicable for the first quarter (April 1, 2021 to June 30, 2021) for FY 2021-22.”


Sukanya Samriddhi Yojana Account Scheme – 7.6%

Public Provident Fund- 7.1%


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