Save more money, and you could save on taxes. The government has proposed new tax rules aimed at promoting long-terms savings and retirement benefits. These rules need Parliament approval and if that comes through, they will kick in next year.
Currently, the government allows an exemption of upto 1 lakh for saving schemes like Provident Funds. The government will raise that to 3 lakh if you open a separate savings account and invest in long-term saving schemes, provident fund, and other retirement schemes.
Withdrawing any money from this account will lead to taxation.
The government released the new draft direct tax code and put it up for public comments on Tuesday. Once approved by Parliament, it will replace the 50-year-old Income Tax Act. The first draft tax code was released in August 2009.