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What is the difference between a tax-deferred and a tax-free investment?

Curious about tax savings

What is the difference between a tax-deferred and a tax-free investment?

In India, taxdeferred investments refer to investments that provide a tax deduction or tax benefit in the year the investment is made, but the investment's earnings are taxed when the investment is sold or withdrawn. Examples of taxdeferred investments in India include Public Provident Fund (PPF), Employee Provident Fund (EPF), National Pension System (NPS), and taxsaving fixed deposits.

On the other hand, taxfree investments refer to investments where both the investment and the earnings are not taxed. The investment provides a tax deduction or tax benefit in the year the investment is made, and the earnings are not taxed when the investment is sold or withdrawn. Examples of taxfree investments in India include EquityLinked Saving Schemes (ELSS), taxfree bonds, and Unit Linked Insurance Plans (ULIPs).

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