Tax advantage is a term that is used to denote the tax relief that is provided on certain types of income or investment. In other words, tax advantage is a kind of deduction from payable taxes. The tax advantage is provided by the federal or the state governments. The tax advantages are provided for a number of purposes.
The governments provide tax advantage to the citizens in form of partly exemption of taxes. Again there are certain examples like natural disasters where the national government relieves citizens from paying any kind of taxes. On the other hand, there are the loans like education loans and so on, where tax advantage is provided but partly. This means that the interest rate paid for the loan is liable to be deducted from the payable taxes. On the other hand, if the family income is very low, the government considers it with full sympathy and in that case, full tax advantage can be provided.
Again, the national government provides tax advantage or tax relief on a wide range of investment plans, like retirement plan and some more. There are a number of countries where this type of tax advantage is provided by the government. The prime motive of the government behind providing such advantages to the investors is that the government wants to develop the investment habit of the citizens.
Again there are certain nations, where the national government is under pressure. The development of medical facilities is helping to increase the average age of human beings. But at the same time, this is causing some financial problem for the national governments. The government expenditures on pension plans and other facilities that are provided to the retired and aged persons are becoming huge. To arrange money for these plans and services, the national governments are encouraging the private investors to invest in huge amounts so that the money can be invested in these programs.
The tax advantage is used as an instrument to stimulate the investment habits of the citizens. At the same time, some national governments are encouraging people to keep money in such accounts that are meant to provide financial services in the post-retirement periods. These accounts are provided with tax advantage and the savings on these accounts are totally tax exempted.
Last Updated on : 1st July 2013