HOW NOT TO SAVE TAX

Sale Tax And Value Added Tax|Question Practice

The interest rates in the institutional market have come down significantly and at present are in the range of 5.25 to 5.75 percent per annum. However, interest rates on small savings schemes such as the Post Office Saving Schemes, RBI Relief Bonds, Provident Fund and PPF continue to be administered at high levels in relation to market rates. These schemes also have a variety of tax incentives, which result in much higher post-tax returns and on the flip side more liability for the government. It is ironic that it is predominantly the urban population (and more often people in the high tax bracket), which is benefiting from high rates and tax benefits. The size of small savings has assumed a significant proportion of financial saving in the country. This has also increased dramatically the debt service burden of both Central and State Governments. The interest rates on small savings have decreased considerably during the last few years.