What do EEE and EET mean?

EEE and EET are shorthand for where income tax hits a savings product. E means exempt. T means taxed. The three letters are the contribution, the growth, and the payout. They are a memory aid. They are not sections of the Act. The sections underneath them are what the return actually uses.

EEE: the contribution can be deducted, the growth is not taxed each year, and the payout is not taxed. PPF works this way on the payout under Schedule II, which was section 10(11). The contribution deduction is section 123, which was section 80C, and the new regime under section 202 does not allow it. The payout exclusion still applies. Sukanya Samriddhi follows the same split. People keep saying EEE after they have moved to the new regime. The last letter is still fair. The first letter is not.

EET: a deduction on the way in, growth that is not taxed yearly inside the account, and tax when the money comes out. NPS is this shape. A lump sum is exempt only up to 60% of the corpus. The pension is taxed when it is paid. Your own NPS deduction drops in the new regime. The employer’s contribution can remain. So the first E is already shaky for many subscribers. The T at the end is not.

A bank FD or RD is neither. The deposit is not exempt, except a five-year tax-saving deposit inside section 123, and the interest is taxed in the year it is credited. Calling an FD “EEE” because a relative once said so will not survive a notice.

A worked example

PPF: ₹1,50,000 a year for 16 years at 7.1% matures at ₹45,17,701, of which ₹21,17,701 is interest. That interest is not taxed on the way out. In the old regime the deposit sits in the ₹1,50,000 cap. In the new regime the same salary of ₹15,00,000 is taxed at ₹97,500 with no help from the deposit.

NPS: a corpus of ₹1,13,96,627 splits into a lump sum of ₹68,37,976 and an annuity of ₹45,58,651. The taxable lump sum in that split is ₹0. The pension of ₹22,793 a month is the T. The FD, RD and PPF guide compares the exempt maturity with a taxed deposit. The NPS guide is the EET case.

Mistakes people make

• Using EEE as if it were a section number.
• Forgetting that the new regime removes the contribution deduction for PPF and for your own NPS.
• Assuming an 80% NPS lump sum is fully exempt. The line is 60%.
• Putting an FD in the EEE box because the bank did not deduct TDS. No TDS is not an exemption. The FD example’s tax at 30% plus cess is ₹1,996.
• Comparing Sukanya Samriddhi’s 8.2% with NPS’s 10% as if both were the same kind of promise. One is notified. The other is a planning rate.

The sections

PPF payout: Schedule II (this was section 10(11)). NPS lump sum: Schedule II (this was section 10(12A)), capped at 60%. The contribution deduction, when it exists, is section 123 (this was section 80C). Section 202 is what switches that deduction off.