How to use a P4 account to save money for an investment
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Financial planners can take advantage of a new option available to them with P4 accounts.
The move comes after the Reserve Bank of India (RBI) recently introduced a new tax-free bank account for P4 customers.
Its new tax code for P-4 accounts, which was announced in March this year, has brought with it some tax relief, according to reports.
While the new P4 bank account is still free of charge, it is not a tax-deductible account.
P-4 bank accounts are tax-deferred accounts that allow investors to defer paying tax.
This can be advantageous for people who are in need of cash to cover unexpected expenses, especially if they are trying to save for a big investment.
“P-3 accounts have a higher threshold for income tax to pay.
They also come with a tax deferral period of 30 days,” says Ajay Sridhar, chief financial analyst at The Investment Institute of India.
Tax-deduction for P3 accounts has been a hot topic in recent months with the RBI announcing a tax credit of Rs 1 lakh per year for P 3 accounts.
The new tax regime allows investors to set up an P3 account for a maximum of five years, but there is no limit on the amount that an investor can invest.
With this new tax policy, there will be a greater opportunity for investors to diversify their investments and set up a tax deferred account,” said Sridkar.
Currently, there are three types of P3 banks: Direct P3 bank, PNC bank and the new bank account.
Direct P3 is the first bank account that is tax-exempt and has no tax deferment.
It is open for five years and there is a 10% tax on interest earned on the account.
PNC banks are similar to PNCs.
Direct and PNC bank accounts can be opened with a credit card or cash.
The difference between these two is that a cash-based account is not allowed to be used as an asset and cannot be used for investment.”PNC accounts allow investors the opportunity to invest and earn tax deferments, while direct accounts have limited tax deferring options,” said the Bank of Baroda.
For PNC accounts, there is the option of investing directly, and the tax deferrer can take the form of a deposit.
A cash-only account is also allowed, but not a deposit-only one.
A PNC can be used to invest in P4, P5 or P6 financial products, according the bank.
Unlike a PNC, the new tax plan will not benefit any other income stream.
It does not apply to P4 banks or PNC customers.
However, investors can set up P4 credit cards.
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Financial planners can take advantage of a new option available to them with P4 accounts.The move comes after the Reserve…