New Tax Regime: Will adopting the New Tax Regime affect the interest on PPF? Standard deduction will be beneficial in this

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New Tax Regime: Will adopting the New Tax Regime affect the interest on PPF? Standard deduction will be beneficial in this
New Tax Regime: Will adopting the New Tax Regime affect the interest on PPF? Standard deduction will be beneficial in this

The standard deduction benefit available to salaried and pensioners will remain applicable in both tax slabs (old and new). This standard deduction is currently Rs 50,000.

If you have recently decided to choose the new tax slab, then you do not need to panic. The interest received in your Public Provident Fund (PPF) account will be completely free from income tax. Let’s know why.

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In the old tax slab, the taxpayer used to get the benefit of deduction on different investments and expenses under section 80C. This also included investment made in PPF and the interest received on it. However, in the new tax slab, the option of deduction under section 80C has been removed. This must have worried many people whether now the interest on their PPF account will also be taxed.

Exemption in tax slab

But, experts say that it is important to understand the difference between exemption and deduction in the new tax slab. The interest received on PPF comes under the exemption category, while the profits received under section 80C come under the deduction category.

Even though the option of deduction under section 80C has ended in the new tax slab, the existing exemptions will continue. This simply means that you will not have to pay any kind of tax on the interest received on the PPF account. Those who adopt the new tax slab will also continue to get this benefit. The main changes in the new tax slab are related to deductions, such as deduction under section 80C (ELSS / life insurance premium etc.), deduction under section 80D (mediclaim etc.) and deduction on home loan interest etc.

Standard deduction

It is worth noting that the benefit of standard deduction available to people with salary and pension will remain applicable in both tax slabs (new and old). This standard deduction is currently Rs 50,000. Finally, remember that whether you choose the new tax slab or remain in the old tax regime, the interest earned from your PPF account will remain free from income.

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