Tax Saving Deposit Schemes – No Longer a Temptation?
It has been recognized that the market is filled with financial products that offer better tax benefits coupled with high returns. This has made the tax-saving deposit schemes face the hardship that banks expected would help channel public savings.
It has become principal for banks to push tax-saving deposits, which are approved after a struggle of many years. Since 2006, under section 80C of the Income Tax Act banks qualify deduction up to 1 lakh deposit for five years, but retail tax-free bonds such as Public Provident Fund (PPF) and mutual funds are pushing people away from Tax-Saving Deposit Schemes, say industry executives.
The experience of growing in the short-run money put into the business while making in the long run money put into business outside banks has seen to grow at a much quicker rate.
In harmony with India ratings& operation of making observations, money put in banks that get older in less than one year formed more than 45% of the increase by one addition after another bank money put in the bank in 2013. An interesting/noted part of money put in banks had growths of less than 6 months.
To curb the situation of investments in mutual funds should be locked up for three years to save tax, while the minimum lock-in period for Tax-Saving bank deposits is longer at five years. Some public sector companies offer tax-free bonds with tenures of 20 years, to keep their money invested for longer periods. PPF investments, which are typically for long periods, also give tax-free returns.
In regions like West Bengal where agriculture is the main occupation and income tax is free, the idea of tax saving schemes seems less luring.
According to a senior executive similar trend has been noticed in the south Indian bank as about 0.4% of the bank’s depositors go for these tax saving schemes.
To make tax-savings deposits, bankers are demanding a reduction in the lock-in period to three years.
To make tax-savings money put in the bank, bankers are desire by right a moving to a lower level in the lock-in stretch of time to three years.
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