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What is Section 80RRB of Income Tax Act


Section 80RRB of the Income Tax Act, 1961 is a provision that allows for a deduction of income tax in India for income earned from royalties on patents. It applies to individuals and Hindu Undivided Families (HUFs) who receive income from patents.

Here are some key points related to Section 80RRB:

  1. Eligibility: To be eligible for a deduction under Section 80RRB, the taxpayer should be an individual or a Hindu Undivided Family (HUF) and should receive income in the form of a royalty for a patent registered in India.
  2. Amount of Deduction: The deduction is allowed on the income received as royalty from patents, and it is limited to the lesser of the following amounts:
    • Actual royalty income received
    • Rs. 3,00,000 (as of my last knowledge update in 2022)
  3. Conditions: The taxpayer must fulfill certain conditions to claim this deduction. One of the main conditions is that the taxpayer must be the true and first inventor of the patent, and the patent must be registered in India.
  4. Taxable Income: The amount of royalty income eligible for deduction under Section 80RRB is excluded from the total income for tax calculation purposes.
  5. Filing Requirements: To claim the deduction under Section 80RRB, the taxpayer needs to furnish the details of royalty income and other required information in their income tax return.

Certainly, here are some additional details and points related to Section 80RRB of the Income Tax Act:

  1. Eligible Patents: To claim the deduction under Section 80RRB, the patent must be registered in India. The taxpayer should be the true and first inventor of the patent. It’s important to maintain proper documentation to establish ownership and inventorship.
  2. Calculation of Royalty Income: Royalty income is the consideration received for allowing someone to use, license, or exploit the patented invention. It can include not only the direct royalties but also any lump-sum payments, consideration in kind, or any other payments related to the use of the patent.
  3. Transfer of Patent Rights: If the patent rights are transferred, and the taxpayer no longer owns the patent, they may not be eligible for this deduction. The benefit of the deduction typically applies to the original inventor who receives royalties.
  4. Deduction Limit: As of my last knowledge update in 2022, the maximum deduction allowed under Section 80RRB is Rs. 3,00,000. This means that even if your actual royalty income exceeds this limit, you can only claim a deduction up to Rs. 3,00,000.
  5. Claiming the Deduction: When filing your income tax return, you should report the royalty income in the appropriate section and claim the deduction under Section 80RRB. Ensure that you maintain proper documentation and records of the royalty income received.
  6. Taxation of Remaining Income: Any royalty income that exceeds the eligible deduction limit will be subject to regular income tax rates as per the individual’s or HUF’s applicable income tax slab.
  7. Consultation: It’s advisable to consult with a tax professional or Chartered Accountant who is well-versed in Indian tax laws to ensure compliance and to maximize the benefits of this deduction.
  8. Potential Changes: As tax laws are subject to amendments, it’s essential to monitor any changes in the Finance Act or other tax legislation to stay informed about modifications to Section 80RRB.
  9. Reporting in Income Tax Return: When filing your income tax return, you should accurately report your royalty income and claim the Section 80RRB deduction in the appropriate section of the return form.
  10. Record-Keeping: Maintaining records related to patent registration, royalty agreements, and income received is critical for substantiating your claims during a tax audit or assessment by tax authorities.
  11. Double Taxation: In cases where you receive royalty income from both Indian and foreign sources, you may need to consider double taxation and seek guidance on how to claim deductions and credits under the DTAA to avoid paying taxes on the same income in multiple jurisdictions.

Please note that tax laws can change, and the specific provisions and limits under Section 80RRB may have been updated. It’s essential to refer to the latest tax regulations and consult with a qualified tax professional or Chartered Accountant for the most up-to-date and accurate information regarding tax deductions and eligibility.

Exploring New Tax Regime Beyond Section 80C


A Comprehensive Guide to Tax Saving Instruments: Beyond 80C

Reducing your tax liability is a fundamental aspect of personal finance. While Section 80C of the Income Tax Act, 1961, is well-known for its tax saving benefits, the new tax regime has brought about a change in the landscape of tax saving instruments. In this article, we’ll explore a wide range of tax saving options, including those beyond Section 80C, such as Section 80RRB, Section 80D, Section 80EE, and deductions under Section 80C to 80U, while also discussing the implications of the new tax regime.

  1. Section 80C in the New Tax Regime

With the introduction of the new tax regime (effective from the Financial Year 2020-21), taxpayers have the option to forgo deductions under Section 80C. Under this new regime, you can’t claim deductions for investments in schemes like PPF, EPF, NSC, and ELSS, among others. However, this regime offers lower tax rates, simplifying the tax calculation process for many individuals.

  1. Section 80RRB – Deductions for Royalty Income

Section 80RRB offers deductions for income received as a royalty on patents. The eligible amount for deduction is the lower of the royalty received or Rs. 3 lakh. This deduction is beneficial for individuals involved in research and intellectual property-related income. It encourages innovation and provides a tax relief to those contributing to the development of new technologies.

  1. Section 80D – Health Insurance Premium Deduction in the New Tax Regime

Under the new tax regime, Section 80D continues to be relevant. This section allows you to claim deductions on health insurance premiums for yourself, your family, and your parents. However, the maximum deduction limit under this section is lower in the new regime, making it vital to choose a health insurance plan that balances premium costs with coverage.

New Tax Regime

  1. Section 80EE – Home Loan Interest Exemption

Section 80EE provides tax benefits on interest payments for home loans, especially for first-time homebuyers. In the old tax regime, you can claim an additional deduction of up to Rs. 50,000 over and above the deductions available under Section 24(b) for home loan interest. This is an excellent incentive for individuals looking to purchase their first home.

  1. Deductions Under Section 80C to 80U

Beyond Section 80C, the Income Tax Act offers a plethora of deductions to cater to various financial situations:

  • Section 80DDB: This section provides deductions for medical treatment expenses of specified diseases for yourself or your dependent family members.
  • Section 80E: If you have taken an education loan for higher studies, the interest paid on this loan is deductible under Section 80E. This applies to loans for your children, spouse, or yourself.
  • Section 80G: Donations made to approved charitable institutions qualify for deductions under this section. The amount you donate can be claimed as a deduction from your taxable income.
  • Section 80TTA: This section offers deductions for interest earned on a savings account with banks, cooperative societies, or post offices. The maximum deduction allowed is Rs. 10,000.
  • Section 80U: Individuals with disabilities are eligible for deductions under this section. The amount of deduction depends on the degree of disability.

Certainly, let’s delve deeper into some additional tax-saving instruments and deductions under various sections of the Income Tax Act:

  1. Section 80GGA – Deductions for Agricultural Income

If you are involved in agricultural activities, you can claim deductions under Section 80GGA. This deduction applies to expenses incurred for scientific research related to agriculture. It encourages investment in agricultural research and development.

  1. Section 80GGC – Political Contributions Deduction

Contributions made to political parties qualify for deductions under Section 80GGC. These deductions are designed to encourage transparency and participation in the political process. However, these contributions are subject to specific limits and conditions.

  1. Section 80TTB – Senior Citizen Interest Exemption

For senior citizens aged 60 and above, Section 80TTB provides deductions of up to Rs. 50,000 on interest income from savings accounts and fixed deposits. This helps senior citizens enjoy tax benefits while earning income from their savings.

  1. Section 80GG – House Rent Allowance Deduction

If you do not receive House Rent Allowance (HRA) as a part of your salary but are paying rent, you can claim deductions under Section 80GG. The allowable deduction is the least of 25% of total income, actual rent paid minus 10% of total income, or Rs. 5,000 per month.

  1. Section 80RR – Deduction for Income Earned from PatentSection 80RR offers deductions for income received by individuals from patents. The deduction is available for a specified period and is applicable to both residents and non-residents. This provision encourages innovation and rewards those involved in patent-related income.
  2. Section 10(14) – Tax-Free Allowances

While not a deduction, per se, certain allowances are exempt from tax. These include House Rent Allowance (HRA), Leave Travel Allowance (LTA), and more. Understanding these exemptions can help you optimize your tax planning.


When it comes to tax-saving instruments, it’s crucial to explore options beyond Section 80C and assess their relevance in the context of your financial situation and the applicable tax regime. While the new tax regime simplifies tax calculations for many, it may or may not be the best choice for you, depending on your financial goals and tax planning strategies. Consulting with a financial advisor can help you make informed decisions and optimize your tax-saving strategies while ensuring compliance with the latest tax laws.

Investing in the Indian Share Market: Strategies for 2024


Investing in the Indian share market in 2024 presents both opportunities and challenges. To navigate this dynamic landscape successfully, it’s essential to have a well-thought-out investment strategy. In this blog, we will discuss some key strategies for

Investing In The Indian Share Market In 2024

  1. Diversify Your Portfolio: Diversification is a timeless strategy that remains relevant in 2024. By spreading your investments across different asset classes, sectors, and market caps, you can reduce risk and enhance your chances of long-term success. Consider allocating your investments across equities, fixed income, real estate, and alternative assets.
  2. Sector Rotation: Advanced investors often employ sector rotation strategies to capitalize on changing market conditions. Instead of a static portfolio, they adjust their holdings based on the performance of various sectors. For instance, in a year where the IT sector is outperforming, they might allocate more capital to IT stocks, and vice versa.
  3. Technical Analysis: Technical analysis involves studying price charts, patterns, and various technical indicators to make investment decisions. It can be a valuable tool for timing entry and exit points in the market. Traders use technical analysis to identify trends, support and resistance levels, and potential reversal patterns.Indian Share Market
  4. Fundamental Analysis: Delve deeper into fundamental analysis by not only evaluating financial statements but also looking at qualitative factors like the competitive landscape, industry trends, and management quality. Advanced investors use this information to identify undervalued stocks with long-term growth potential.
  5. Long-Term Investment Approach: In a market marked by short-term volatility, it’s crucial to adopt a long-term investment approach. Historically, Indian equities have shown the potential for significant growth over extended periods. By focusing on your long-term financial goals and holding onto quality stocks, you can weather market fluctuations more effectively.
  6. Research and Due Diligence: Before investing in any stock or asset, thorough research and due diligence are essential. Analyze the financial health, competitive positioning, and growth prospects of companies you’re interested in. Look beyond the headlines and seek credible sources of information. Evaluate management quality and corporate governance practices.
  7. Stay Informed: Stay updated with the latest news and developments in the market. Be aware of global events that could impact the Indian share market, such as changes in interest rates, economic indicators, and geopolitical issues. Reliable information can help you make informed investment decisions.
  8. Asset Allocation: Determine an appropriate asset allocation that aligns with your risk tolerance and financial goals. Your asset allocation should be reviewed periodically and adjusted as your circumstances change. Asset allocation ensures that your portfolio is balanced and tailored to your needs.
  9. Risk Management: Risk management is a fundamental aspect of investing. Consider using stop-loss orders to limit potential losses and protect your capital. Additionally, portfolio insurance strategies like hedging can help mitigate risk in a volatile market.
  10. Monitor Your Investments: Regularly review your investment portfolio to ensure it remains aligned with your goals and risk tolerance. Periodic rebalancing may be necessary to maintain the desired asset allocation. Make adjustments based on changing market conditions and your evolving financial situation.
  11. Seek Professional Advice: If you’re uncertain about your investment choices or lack the time to manage your portfolio, consider seeking advice from a qualified financial advisor or investment professional. They can provide guidance tailored to your specific financial objectives.
  12. Be Cautious with IPOs: While IPOs can offer exciting opportunities, exercise caution. Not all IPOs perform well after listing, and it’s essential to evaluate each offering carefully. Avoid the temptation to invest in IPOs solely based on hype.
  13. Tax Planning: Keep tax implications in mind when making investment decisions. Understanding the tax treatment of different assets and investment strategies can help you optimize your returns and reduce your tax liability.

In conclusion

Investing in the Indian share market in 2024 requires a well-structured approach. By diversifying your portfolio, adopting a long-term perspective, conducting thorough research, and staying informed, you can position yourself for success in this ever-evolving market. Remember that patience and discipline are valuable attributes for investors in any market environment.

How To Get Started Intraday Trading, Step-By-Step?


Are you planning to make a livelihood from the stock market? If your answer is affirmative, the most familiar approach is intraday trading or day trading. As against investing your money and waiting for months and years to book profits, in online trading, you can make gains within an hour. This can particularly happen when you engage in intraday trading. At times, you can get to see profits within minutes in intraday trading. 

No one can deny the fact that internet technology has improved a lot these days. Right from speed to bandwidth, everything has improved. Nowadays, with mobile data available, you can learn and even start to day-trade even from your smartphone. Before you start learning how to get started in online trading, here is a basic idea of the stock market.

What is Stock Market or Share Market in India?

The stock market is a combination of exchanges and markets. It is a place, where regular activities of selling, buying and issuance of public-held companies happen.  When you get into this market, you will have to buy, sell and hold stocks either for a short or a long period. When it comes to stock markets, two types of online trading takes place. The first type is active trading. This is a technical approach to capitalize on short-term price changes. The second is passive trading. Its focus is no long-term investment as against short-term trading. There is also a concept called position trading, which is  a type of passive trading.

As you are interested to participate in active trading and making profits quickly and daily, here is how to get started with trading in the stock market. Before you start intraday trading, it is better to understand what this concept is all about.

What is Intraday Trading in Share Market?

As you can get from the name, intraday trading is a kind of trading in which you buy and sell stocks on the same day.  When you choose to do intraday trading, your goal will not be to hold or carry a position over the next few weeks or days. The main goal is to make quick profits and exit your position as quickly as possible. Here, the holding of stocks will happen for a few minutes to a few hours alone.

Some Rules To Remember During Intraday Trading:

As a beginner to intraday trading, you will have to remember some rules. In turn, you can restrict losses and maximize your profits:

  • In day trading, it would always be good to choose liquid stocks. The reason is that these are stocks that you can easily enter and exit.
  • Before you begin trading on a given day, it is better to prefix entry and exit points
  • Make sure to have a stop loss. The reason is that if you do not do it, there are chances that you may incur a great loss.
  • You should have the mentality of a trader and not an investor when you engage in intraday trading.
  • The market might provide you with multiple trading opportunities in a day. So, it is better to ensure that you are ready to engage in multiple trades with the same indices or companies.
  • Always remember the rule that trend is your friend. It means that you should move your trades in line with the market to make profits.

How to Start Intraday Trading Online in 6 Simple Steps?

intraday trading tips online

Six steps to start online intraday trading in India

Now, you are ready with the basic knowledge of intraday trading.  Here are the steps you will have to follow to instigate your stock market journey on day trading:

  • Step 1: Have A Trading Account: The first step in this process is to have a trading account with one of the brokers. Examples of some of the popular brokers in India are UpStox (Open Online Demat Account on Upstox), Angel Broking and Zerodha. If you have an account for stock trading with one of these brokers or any other broking service, you can do intraday trading using the same account.
  • Step 2: Have A Sufficient Margin in your Trading Account: Once you are ready with a trading account, you have to ensure that you have enough balance in your trading account. Margin is nothing but the least amount of money you need for trading. The amount of margin required differs from a regular trade to an MIS. MIS is nothing but Margin Intraday Square Off.You might wonder how this account is different from a regular online trading account. When you have a regular account, you can carry the position over to the next day. But, when you have an MIS account, the position will get squared-off automatically before the trading day ends.
  • Step 3: Create a Watch List of Stocks to Trade: This is an important step. The reason is that you cannot be a watchdog on all shares listed in the Bombay Stock Exchange and National Stock Exchange. The idea is to have a watch list of a few stocks. When you do this, you can get a chance to moderate and buy the stocks and sell them off within the day.
  • Step 4: Select the Stock you Wish to Trade: Now, you have a watch list from the previous step. From this list, you will have to choose the stock or share that you wish to trade on a given day. Here, you can buy and sell a few stocks.
  • Step 5: Check the Order Book: Once you have placed your order to buy a particular stock based on the previous step, this is the time to check whether the order has been placed.
  • Step 6: Continuous Monitoring of Position: The next step is to continuously monitor the position of stocks you have bought. Look for the right time to sell them. When you see that you have started to experience loss, you should use the stop loss facility to prevent further loss of money.
Bank Accounts: What Types of Bank Accounts in India?

You might have some initial hiccups when you start intraday trading yourself. It might take some days and even weeks to learn the tricks. Thanks to intraday trading courses offered online these days. You can get help from these courses to learn things quickly.

What Are The Best Tax Saving Schemes In India?

Naturally, every breadwinner earning more than a specific income per year pays taxes in India. But, as humans every one of us looks for ways to reduce the taxes we pay in one way or another. Thanks to different investment instruments in India that come with tax-saving benefits. Let us throw some light on some of the sections of the Indian Income Tax Act that will help you save on your tax payment.

Know About Section 80C

Section 80C of the Income Tax Act is the first thing that gets to the minds of investors when it comes to tax saving schemes in India. Tax deduction under this section can be claimed by an individual only when he opts for an existing or old tax regime in a particular financial year. But, if you opt for the new concessional tax regime, you cannot claim deductions under this section.

How to Save Income Tax

How Does Section 80C of the IT Act Work?

As this is one of the most popular sections, understanding how this section works will help a taxpayer like you:

  • Using this section, you as an individual or even a HUF can bring down Rs.1.5 lakh from your gross total income in a particular financial year. In turn, you can gain a considerable reduction in the net taxable income. As a result, there will be a reduction in the tax you pay as well. When you use this section completely, you can save up to Rs.46,800 including a cess of 4%. This holds if you are an individual coming under the highest tax bracket of 30%.
  • To claim this deduction, you will have to invest your income in one or more eligible tax-saving instruments. Otherwise, you will have to spend the money on a particular deductible in the same financial year. In other words, you can claim this tax benefit either by spending or investing up to Rs.1.5 lakh in avenues specified under this section.
  • Investments that are eligible for deduction under this section are as follows, the tax saving schemes in India:
    • Senior Citizen Savings Scheme
    • Five-year tax-saving fixed deposit with a post office or a bank
    • National Savings Certificate
    • National Pension Scheme
    • Sukanya Samriddhi Savings Scheme
    • Equity-linked Savings Scheme
    • Public Provident Fund
    • Employees’ Provident Fund
  • When you wish to invest in these instruments, you should remember one thing. Each of them has its own tax treatment on returns, liquidity, rate of return and investment limit.
  • As mentioned earlier, some expenses can be claimed as a deduction under this section. They are school fees to your children, repayment of principal of a home loan and life insurance premium you pay.

Tax Saving Options Other Than Section 80C:

Now, you know certain things about Section 80C deductions. But, this is not the only section available under the Income Tax Act in India to help you save on your taxes. Yes, there are other options available. Majorly, these deductions are sub-sections of Section 80 of the IT Act. You can gain a better understanding of the exemption limit applicable for different sections from the table below:

Section Deduction on Deductible Limit
80CCC The money you deposit in LIC or any other insurer’s annuity plan
80CCD (1) Your contribution as an employee to National Pension Scheme Account Up to Rs.1 Lakh
80CCD (2) The contribution made by your employer to National Pension Scheme Account Up to 10% of the salaryUp 
80CCD (1B) Extra contribution to National Pension Scheme Account Rs. 50,000
80D Health Insurance Premiums Up to Rs. 60,000.
80DD Spending made on a handicapped dependent Fixed amount of Rs.75000 if the disability is up to 80%.

In the case of dependants with severe disabilities, it is fixed at Rs.1.25 lakhs

80DDB Treatment of particular illnesses Up to Rs.40000 for people aged up to 60 years.

Up to Rs.60,000 for treatment to people in the age group of 60 to 80 years

Maximum of Rs.80,000 for treatment to dependants of more than 80 years

80E Interest payment on education loan Actual interest paid
80EE Only for first-time homeowners interest paid on home loans Up to Rs.50000
80G Donations made to approved charitable institutions 50 to 100% of the donated money
80GG Rent paid by employees not having HRA Lower of the following:

25% of the total income

Rs.5000 per month

Rent paid over and above 10% of the total income

80GGB and GGC Contributions made by individuals and companies to a political party  For companies, no deductions apply

For individuals, 100% of the actual contribution only made by modes other than cash.

80TTA Interest income from savings account Rs.10000
80TTB Interest from banks and post office. This applies only to senior citizens Maximum of Rs.50000
80U Taxpayers with disability For physical disability and mental retardation, Rs.75000 limit is applicable.

In the case of severe disabilities, the exemption limit is Rs.1.25 lakhs

80RRB Income from patent or royalty income  Up to Rs.3 lakhs

What To Know About House Rent Allowance?

Are a person earning a salary? If so, you can get tax-saving benefits of House Rent Allowance. You might have this allowance shortly called HRA as a part of your salary. Let us consider that you are living in a rented house. In this case, you can claim HRA exemption from your total salary. The utmost exemption you can get in this way will be the maximum amount of the following:

  • Rent paid
  • 10% of yearly salary
  • 50% of your salary if you live in a metro city in India. Otherwise, it is 40% of your salary if you live in non-metro cities.
  • The actual amount of HRA received.
What Other Exemptions You Can Claim On Your Taxable Income?

Apart from HRA exemption, you have the option to avail tax exemption on medical allowance. The other allowances, where tax exemption apply are conveyance allowance, meal coupons and leave travel allowance. Further, the money you receive as gifts is free of taxes.

There is no upper limit on exemption applicable if you get the gift from your direct relatives. But, if the gifts are from your friends and not relatives, the tax exemption of Rs.50000 is applicable. It means that gifts that you receive from non-relatives are exempted from taxation up to Rs.50000. Cash gifts for your marriage are completely tax-free. This rule applies irrespective of whether they are received from your friends or family. Further, money received on will is also free of taxes.

What Are Index Funds and How Do They Work?

Do you look for a smart way to invest? Are you particular about finding a diversified investment? Do you want them to be tax-efficient and low-cost basket of securities? You can get all these things achieved in a bundle from Index funds. 

What are Index Funds, Are index funds Better Than stocks?

As you can understand from the name Index funds are mutual fund investments that invest in stocks. These are not regular stocks. But, they are stocks that look similar to the indexes like BSE Sensex, NSE Nifty in stock market. Index fund’s are managed passively. What does it mean? The fund manager invests in the matching securities available in the underlying index. Also, he does it in the matching ratio and does not make any changes to the portfolio arrangement. Index fund’s are committed to offering investors returns that you can compare to the index that you track.

When you invest in index fund’s, your fund manager will not play an active role in the selection of stocks and industries. He will invest in all stocks that structure the index to be obeyed. You will find one thing here. The weight-age of stocks in the index fund will match and weight-age of every stock in the index. It means that the fund manager will copy the index when building the fund’s portfolio. He will try to retain a portfolio in sync with its index at all times. What if the weight of stock within the index changes? When this happens, your fund manager will try and sell or buy units of the stock. He does it to align its weight in the portfolio similar to the index.

How are Index Funds Different from Actively Managed Funds?

Here are the key factors that differentiate index funds from actively managed funds:

Index Funds – Definition, Risk and Returns

  • Management fee: Index fund management will not cost you more. The reason is that these funds follow the benchmark of popular indexes. On the other hand, actively managed funds need continuous professional management. It means that you will have to pay a higher management fee for these funds.
  • Annual Expense Ratio: Your fund manager need not have to frequently manage index funds. So, these funds carry a low expense ratio. This is not the case with actively managed funds as they need constant monitoring. In turn, the annual expense ratio will be far higher.
  • Risk: The risk in index fund investment allies with its benchmark risk. When it comes to actively managed funds, they can turn riskier. This can happen particularly when they do not perform in line with their benchmark.
  • Objective: The objective of index funds is to counterpart the performance of a particular market index or benchmark. Actively managed funds, always try to outperform the market benchmark.

Advantages of Index Fund Investment:

You might be wondering why to invest in an index fund when there are other investment options available. But, index funds carry many benefits like those mentioned below that make investing in these funds a worthy choice:

  1. Low Costs: In index funds, the composition of a target index includes known numbers. So, as compared to actively managed fund’s, it costs less to run an index fund. Also, the expense ratio of index fund’s is very low as compared to other fund’s. All these factors contribute to lower spending when you invest in index fund’s.
  2. Simplicity: In index funds, the investment goals are easy to understand. Once you are aware of the target index of the index fund, you can identify the type of securities that hold the index fund. Also, management of an index fund is easy and you can do it once every year or once in six months. These two factors make an investment in index funds simple.
  3. Lower Turnovers: Turnover denotes the purchase and sale of securities by a fund manager. When securities are sold, they can attract capital gain taxes. At times, it is passed on to you as an investor. As index fund investments are passive, the turnovers are lower compared to actively managed funds. In turn, you are relieved of capital gain taxes.
  4. No style drift: Style drift is a concept that happens when the managed funds go beyond the purview of their described style. Managed funds do this for increasing returns to investors. These drifts can have a negative impact on the portfolio of an investor. Particularly, this can happen if you have developed your portfolio with diversified investments. On the other hand, it will not happen with the index fund.

What is PPF (Public Provident Fund) – Features & Interest Rate in 2022?

PPF is the short form for the term “Public Provident Fund”. In India, it was launched in 1968. The purpose of its launch is to organised tiny savings as investments. Above all, investors can get returns as well. This is why Public Provident Fund is called a savings-cum-tax saving investment instrument. Apart from helping an individual to save on annual taxes, it can help with building a retirement corpus as well. Are you a person looking for a safe investment? Do you wish to save taxes and earn guaranteed returns? If your answers to these questions are affirmative, PPF Account is the answer for you.

What is a PPF (Public Provident Fund) Account?

Many banks offer the opportunity to create a Public Provident Fund account for customers. It is a popular long-term saving-cum-investment option in India. Banks and other financial institutions in India offer it. It is classified as this type of product because it helps with tax saving, getting returns and assuring safety as well to investors.

In India, the National Savings Institute of the Finance Ministry is the first body to offer a PPF account to the public. From there on, it has improved as an efficient tool for the creation of long-term wealth for investors. When you open a Public Provident Fund account in any bank, you will get it with a 15-year maturity period. Also, you will get the option to extend your investment after 15 years. For a small saver like you, PPF is undoubtedly, an attractive investment instrument. This is because of the tax benefits it offers and also the attractive interest rates.

Who is Eligible to Open a PPF (Public Provident Fund) Account?

If you are an Indian citizen, you are eligible to open a PPF account with any bank in India. You can open this account under Public Provident Fund Scheme and you can get tax-free returns from this account. 

Is non-resident Indians Eligible?

From August 2018, NRIs are not permitted to start a PPF account in India. However, if you have started an account before you turned an NRI, you can continue the existing account for up to 15 years. Once the maturity period reaches, you will have to withdraw and cannot extend.

What are the Key Features of PPF (Public Provident Fund)?

PPF stands unique from other savings instruments due to the following features:

Features of Public Provident Fund

  1. Loan against Public Provident Fund: If you own a PPF account, you can take a loan against the balance you have in this account. But, remember that you can take a loan only after the third year and before the 6th year of your account opening date. Let us consider that you are applying for a loan this year. In this case, you can take a loan equal to 25% of your PPF balance at the end of the previous year.
  2. Taxation Benefit: As a PPF account falls under the EEE category of tax policy, you can get the best tax benefits for this account. EEE means Exempt-Exempt-Exempt according to Indian tax policy. In other words, in the year of your investment, you can claim the amount you invest in PPF as a deduction under sec 80C. Further, the interest you earn from your Public Provident Fundaccount and even the amount you accumulate in this account is free of tax liability.
  3. The Least and the Utmost Investment: The least amount you can invest in your Public Provident Fund  account in any year is Rs.500. So, anybody can invest in this account. In the same way, the utmost amount you can invest in a year is Rs.1.5 lakh in this account. This is again beneficial for those, who are ready to invest this much money in their PPF account in a year to save tax.
  4. Interest Rate for PPF Investment: The government sets the interest rate for PPF. Also, the government pays this interest every quarter. At present, the interest rate applicable to the PPF account is 7.1%. Every month, the amount of interest you get will be calculated. For this, the lowest PPF balance in your PPF account after the 5th of every month until the last day of the money will be considered. Also, the interest will be credited to the Public Provident Fund account itself. The accumulated interest for each quarter is paid by the government at the end of every financial year to your Public Provident Fund account.
  5. Lock-in Period: As mentioned earlier, you will get back the money you invest in a Public Provident Fund account after 15 years. This is the lock-in period from the date of account opening. You can withdraw the money only on maturity. Also, you can extend this tenure to five more years. You can do this only after 15 years. What if you need the money prematurely? Premature withdrawal is permitted. However, you can avail of it only in the case of emergencies.

So, a Public Provident Fund account carries many benefits and features. It is a safe investment instrument. Of course, the interest rate is fixed at 7.1%. But, you can ensure the safety of your money in this account.

What Are Liquid Funds and How They Works?

Are you new to the term liquid funds? It is a category of the mutual fund. The unique thing about this type of mutual fund investment is that it invests in money market and debt securities. Also, most importantly, these securities carry a maturity of just 91 days maximum. It can include bank term deposits, certificates of deposits, commercial papers and treasury bills to name a few. The assets invested in these funds are not tied up for a longer period. The reason is that liquid funds do not carry a lock-in period. 

You might wonder how much return you can expect from these funds. You cannot expect any guaranteed returns from these funds. Do you know why? The performance of this fund relies upon the market performance. Nevertheless, an investor thinking about better returns prefer these funds against fixed deposits. The reason is that fixed deposits give only a fixed return. But, the chances of better return make liquid funds interesting. When the market booms, more return is possible. But, the risk is more as the market can fluctuate and can even go down at times.

Who Should Invest in Liquid Funds?

Liquid fund’s generally invest in instruments with fixed income. This is done to ensure liquidity to investors and for capital protection. So, the fund managers invest only in high-quality instruments. So, liquid funds are safer compared to other mutual funds. They are indeed risker as compared to fixed deposits. So, are you a person with low to medium risk tolerance ability? Then, you can confidently choose to invest in liquid funds. The reason is that they offer better returns compared to fixed deposits.

How Do Liquid Mutual Funds Work?

The main goal of any liquid fund is to ensure not just liquidity but also capital protection. So, the fund manager ensures the selection of high-quality debt securities for investing. He does it according to the mandate of the scheme. He also makes sure that the average maturity of the portfolio is less than 91 days. The fund manager will try to deliver better results. He will do it by matching the maturity of your portfolio to the maturity of particular securities.


How Are Liquid Funds Beneficial?

When you choose to invest in liquid fund’s, you can expect the benefits listed below:

Benefits of Liquid Funds

  • Compared to current and savings bank account, liquid funds can bring better returns. 
  • As the investment is made in instruments that carry high credit ratings, these funds are the least volatile.
  • Most liquid funds do not carry exit loads.
  • As compared to debt funds, liquid fund’s are known to carry the lowest interest rate risk. The reason is that when you invest in these funds, your money is invested by fund managers basically in fixed income securities. Also, the securities carry short-term maturity.

Key Features of Liquid Funds:

  1. Possibility to Invest for a Shorter Period: Do you look for a source to park or invest your money for a short period? Do you look to get the return within a few months or weeks? If so, liquid funds can be the most efficient financial instruments for you. Of course, similar to other mutual funds, you cannot guarantee any return of interest or principal when you invest in liquid fund’s. Nevertheless, the very structure of these funds makes them the right choice for investing funds even for a shorter period. This would be a beneficial move against keeping the money in an interest-earning financial instrument with fixed investment period.
  2. Withdrawal at Any Time: As no fixed term is involved, you have the option to take out your money at any point in time. You will be surprised to know that you can withdraw the funds even the next day of your investing. Moreover, you can earn accrual for every day of your investment.
  3. No Redemption or TDS: As against some instruments, where tax is deducted at the source at the time of redemption, liquid funds do not carry any TDS on redemption.
  4. No Exit Load: The fee charged for exiting the fund before the due date or exit load is not applicable in liquid funds. This rule applies in most cases when investing for a week or longer. So, you can experience a reduction in the investment expenses that are common in other types of mutual fund investments.

Liquid fund’s are open-ended schemes. Here, the money is invested both in money market instruments and debt with a short maturity period. So, this feature of liquid funds mitigates the risk from volatility in the interest rates. In turn, you can gain high liquidity in your portfolio and can generate stable income. What are you waiting for? Start planning your investment in a liquid fund!

What Is (NPS) National Pension Scheme? How to Open NPS Account?

Are you new to the term NPS? If you are a person interested in saving money through investments, you should know about this scheme for sure. NPS stands for National Pension System. It is nothing but a defined and voluntary contribution retirement savings scheme. The purpose of this scheme is to enable the investors to make the best decisions for their retired life. They can save money right from their working period regularly on this scheme and can reap the benefits after they retire. The scheme aims at nurturing the habit of saving money for the future among the working community. This scheme was started to provide an adequate retirement income for every Indian citizen.

Who Should Invest in NPS (National Pension Scheme)?

Are you a person thinking about planning for your retirement right at a young age? If so, NPS (National Pension Scheme) is a good scheme for you. Also, this scheme is for individuals with a low-risk appetite. A regular income in the form of a pension after you retire will undoubtedly be a boon. This holds particular for individuals retiring from the private sector as they do not get any pension after their retirement. 

You will not deny the fact that a systematic investment like this can make a huge difference in your life after you retire. Even, if you are a person intending to make the most out of 80C tax deductions, this scheme is for you.

What Type of Tax Benefits You Can Get from NPS?

You can get tax exemptions on the contributions you make towards the scheme. However, this exemption is applicable only up to Rs.1.5 Lakhs under section 80C of the Income Tax Act. Let us consider that you and your employer contribute to this scheme for your benefit after retirement. In this case, both the contributions from your end and your employer’s end will be applicable for tax exemption. Here are further details on tax exemption applicable for NPS investment:

  • 80CCD (1) – This is a part under section 80 ELF-contribution. You can claim the utmost deduction of 10% of your salary for tax exemption using this section. Are you self-employed? In this case, the limit is 20% on your gross income.
  • 80CCD (2) – This section covers the contributions that employers make on behalf of their employees towards the (National Pension Scheme) NPS Scheme. So, this section does not apply to self-employed taxpayers. The utmost amount applicable for tax exemption is the lowest of the actual (National Pension Scheme) NPS contribution made by an employer. It also applies as 10% of Basic along with DA and Gross total income. 

Apart from these tax benefits, you can claim any additional self-contribution you make to a maximum of Rs.50,000 under sec. 80CCD (1B) as National Pension Scheme Tax Benefit.

Kinds of (National Pension Scheme) NPS Accounts:

NPS Accounts are basically classified into two kinds. They are individual (National Pension Scheme) NPS Account and Corporate NPS Account. In the first type, the account holder, who is also called the subscriber, is the only contributor. He handles everything including investment choice, scheme preference and annuity service provider. Any Indian citizen can open an Individual (National Pension Scheme) NPS account voluntarily. By doing this, he can avail tax benefits. Also, he can ensure regular income after he retires. The entry age for this type of NPS is 18 to 70 years.

In a Corporate (National Pension Scheme) NPS Account, both the subscriber and his employer contribute to the account holder’s account. For the employees to avail of corporate NPS benefits, the employer will have to register for Corporate NPS for the employees.

In (National Pension Scheme) NPS System, you have the option to open a couple of sub-accounts under the same Permanent Retirement Account Number shortly called PRAN. The sub-accounts are referred to as tiers in NPS. 

  • Tier I: This is also referred to as a pension account. In this case, contributions up to Rs.50,000 are eligible for extra deductions from taxable income under sec. 80CCD (1B). These contributions should exceed Rs.1.5 lakhs under section 80C to be eligible for the deduction. The withdrawals in this case are restricted and are subject to the terms and conditions.
  • Tier II: In this case, you have the option to invest an extra amount in your NPS account. You can withdraw your entire accrued corpus fund under this type at any point in time. What if you have not contributed even the initial money to a tier II account? In this case, the account will be deactivated automatically as per the process. The problem with this account is that no tax benefit is applicable. However, you have the option to transfer funds from Tier II to Tier I. Vice versa is not possible though.