EEE, EET and ETE De-jargoned

EEE, EET and ETE are three basic terms used for investment done for tax saving purposes. Investments are made either with an intention to grow the capital on investment or to save tax. Your money is taxed at different stages of investment– when you invest in an instrument, when your investment yields interest or returns, and when you withdraw the lump sum amount (sum of your principal and returns).

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Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

There are three ways in which tax is implied to your investments. Through this article, we have tried to help you understand the category under which your investment falls and the exemptions.

EEE-Exempt Exempt Exempt

The first exempt here means that your investment qualifies for a deduction. Therefore, part of your salary that is equal to the invested amount is not taxable. The second exempt implies that the interest earned during the accumulation phase is also exempted. The third and final exempt here means that the income you generate from the investment would not be taxable at the time of withdrawal.

EEE status is usually applies tolong-term investment instruments, such as Employee Provident Fund and Public Provident Fund. Some other instruments such as life insurance policies and equity-linked savings schemes (ELSS) also fall under the EEE status. Also, the New Pension System will enjoy the EEE status as per the revised draft Direct Taxes Code, but ELSS and insurance-cum investment plans will move to the EET category.

EET-Exempt Exempt Taxable

The EE here denotes that your invested money is exempted at the stages of contribution as well as accumulation. The T denotes that the lump sum amount you withdraw is taxable. Since your lump sum i.e. principal plus returnis taxed at the time of withdrawal, the returns from such investment instruments eventually come out to be low;but it also depends on your tax slabs. For instance, if the rate of return on a person’s investment is 8%, and the he falls under the 20% tax bracket, then he will receive returns at the rate of 6.4% on investment.

ETE-Exempt Taxable Exempt

The first exempt here means that the amount of your income equal to the investment amount is eligible for deduction subject to the total exemption limit. The interest from these investments is taxable and the same is denoted by T or taxable. The third term, exempt, indicates that the lump sum amount withdrawn at the time of maturityis tax free.Therefore, if you have invested in an instrument with ETE status, then only the interest component of your investment will be taxable. For instance, a fixed deposit for a term of 5 yearsfalls under the ETE status, then the amount you invest towards the FD is eligible for a deduction, the interest accrued is taxable but the maturity amount is exempted from tax. NSCs and Bank Tax saving fixed deposits are the best examples for this category.

˜Top 5 plans based on annualized premium, for bookings made in the first 6 months of FY 24-25. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

Past 10 Years' annualised returns as on 01-02-2025

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
++Source - Google Review Rating available on:- http://bit.ly/3J20bXZ

^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%

¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.

**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).