Tax saving investment schemes for those looking for secure, safe and fixed interest rates on their savings meant primarily for saving taxes have several common options to consider. The five-year tax saving bank savings scheme, five-year national savings certificates (NSCs) and the post-dated tax debits are three such schemes that offer tax saving benefits under certain sections of the Income Tax Act. If the tax savings you enjoy on your savings can be used for tax planning purposes, then these schemes can help to save a great deal of money in tax over the long term.
These schemes can be especially attractive to those wanting to diversify into the stock market or the financial markets to increase their annual return rate. Although they offer very low initial costs, the tax saving potential of these schemes is dependent on how well the investors can identify the tax saving opportunities that will occur when the schemes are taken advantage of.
One of the most common tax saving schemes available is called the ‘tax free’ savings account. By simply holding funds in this type of account, the individual will enjoy tax-deductible interest income from the savings as long as the funds remain invested in the account. This type of account is open to anyone and has no restrictions on the type of accounts to be opened. As long as a person has enough money in the account to cover his or her expenses, then they can enjoy tax saving benefits in the future.
This type of savings account can be especially useful to those people who plan to retire later in life as it allows them to keep their annual return rate higher during retirement. Unlike the traditional savings account, this type of account requires no minimum balance or minimum contribution levels.
Another type of tax saving account is known as a ‘risk free’ savings scheme. These schemes only require that individuals keep funds in the account with them for a certain amount of time in order to qualify for tax breaks upon the sale of their portfolio of securities at maturity. As soon as the individual sells his or her investment in the account, they no longer benefit from the tax-free investment.
There are several other types of tax saving schemes available to those looking to save more money in tax by investing in a range of asset classes. Each of the above mentioned schemes comes with their own unique benefits and pitfalls. As with all financial investments, it is important to do your due diligence and research before choosing a particular scheme.