E-E-T? What's that?
You've probably read dozens of news reports that the budget may see a migration from E-E-E to E-E-T. What in the world is that?
Well, its a very simple rule.
1) The first E stand for tax exemption at the time of investment
2) The second E stand for tax exemption in interest accrual
3) The third E stands for tax exemption at the time of withdrawal.
If E-E-E will be replaced by E-E-T, it means, the third rule will be replaced by a tax. That means, no exemption will be available on withdrawal. Of course, the E-E-E/E-E-T rule applies only for those investments that give you a tax deduction at the time of investment.
First, look at the table that shows the various investments that we have today and their tax implications at every stage, that is, at the time of investments, at the time of dividend/interest accrual and at the time of capital appreciation/ withdrawal.
You will notice that some of the investments have a tax deduction at the time of investment. It is these instruments that will come under the scanner for E-E-T. The logic is simple - you cannot get tax sops both, at the time of investment and at the time of withdrawal. Therefore, if you are getting a tax break at the time of investment, then be ready to forego a tax exemption on withdrawal.
Whether PC will steam ahead with this change or succumb to leftist pressure, we will find out on Feb 28th. For all the tech gurus out there, PC in this part of the world means P Chidambaram ;-)
P.S. I hope you can read the contents of the table. This is the best I could do with my little tech knowledge.