Tax Saving Guide: Types of Investment Plans with Tax Benefits

Including investment plans with tax benefits in your financial portfolio allows you to grow your savings over a long period. Purchasing tax-saving instruments such as savings and investment plans may reduce your taxable income while building your wealth to support your financial needs. Keep reading for more information about investment plans with tax benefits.

Definition of Investment Plans

Defined as a tool for financial planning, investment plans allow you to structure your portfolio to include various strategies for growing your wealth. These could include life insurance with a savings component, real estate, stocks or mutual funds for maximizing the returns on your investment.

What is Investment Plan?

Investment plans let you plan for your and your family’s financial security by managing your income to include savings. These plans let you evaluate what’s needed for financial protection, ensuring you save enough money for your emergencies, lifestyle goals and retirement.

Importance of Investment Plans

The importance of having investment plans as part of your financial planning strategy includes ensuring you have a flow of income even when you stop working. This gives you peace of mind that you can maintain your current lifestyle even when you can no longer work. They encourage you to set aside savings for future financial well-being.

Benefits of Tax Saving Strategy

Including a tax-saving strategy in your financial planning allows you to grow your wealth faster.

Incorporating Tax Saving Strategy Improves Your Financial Future

The sooner you incorporate tax-saving investments into your financial portfolio, the more funds you’ll have for the future. Purchasing tax-saving instruments early on gives you the head-start you need for a secure and comfortable financial future.

Inculcates Healthy Financial Habits to Help You Save Tax

Investment plans instil healthy financial habits that help you grow your savings and save on tax at the same time. By setting aside a portion of your income for investments, you’re saving money every month for a secured tomorrow.

Most Tax Saving Instruments Offer More Than Just Tax Benefits

Depending on the tax-saving instruments you pick for your portfolio, you can benefit from other types of savings beyond taxable deductions. These include life cover; maturity amounts and health protection.

You Benefit From Tax Deductions on Long-Term Purchases

Long-term purchases such as products that include both life insurance and investment components allow you to build your savings from tax deductions allowed on premiums paid. Bangladeshi citizens receive tax rebates on the contribution portion paid towards life insurance.

Types of Investment Plans

In Bangladesh, citizens have various types of investment plans available to them which could include tax benefits.

National Pension Scheme

The Bangladeshi parliament passed the Universal Pension Management Bill 2022 in January 2023. Known as the Universal Pension Scheme, all Bangladeshi elderlies will receive a monthly stipend to support their daily living expenses. All citizens between the age of 18 and 50 can join the scheme.

Life Insurance

Life insurance policies encourage you to put aside savings every month for premium payments. In return, the policyholder gets a death benefit payout for their loved ones, a maturity face amount when the policy expires and other coverage that provides financial support. MetLife Bangladesh offers a variety of life insurance policies that include tax rebate benefits.

Public Provident Fund (PPF)

Not to be confused with the state-owned pension scheme for public sector employees, the Provident Funds Act in Bangladesh requires employers to contribute to a provident fund for retirement benefits. Employers contribute a percentage of the employees’ monthly basic salary towards a provident fund. This allows permanent employees to save for retirement when they exit the working sector.

Senior Citizens Saving Scheme

Various banks in Bangladesh offer senior citizens the option to save for their retirement by investing in savings accounts designed for persons over 60 years old. They often come with higher interest rates to allow for better returns on deposits made.

Bank Fixed Deposit Scheme

Banks allow you to deposit a lump sum at a fixed tenure with an agreed interest rate. When the tenure expires, you receive your invested amount plus compound interest. This financial instrument lets investors save in the long term as the money can’t be withdrawn before the maturity date. Most Bangladeshi banks offer fixed terms of one to 12 months.

National Savings Certificate

Supervised by the Internal Resources Division of Ministry of Finance of Government of Bangladesh, the National Savings Certificate includes several savings schemes. These are run by the National Savings Department, Bangladesh with the schemes offering higher returns compared to banks. Women, pensioners and other investors in the country can participate in these schemes.

How to Plan Tax Saving Investments: Income Tax Saving Tips

There are a few ways you can plan for tax-saving investments while benefiting from taxable rebates as per the Bangladeshi Income Tax laws.

1. Tax Saving Investments for Single Income-Earner or Unmarried Individuals

As a single income-earner or unmarried individual, you can opt to invest in options such as the Universal Pension Scheme, through your company’s provident fund or fixed deposit schemes. Purchasing a life insurance plan such as MetLife’s Fixed Deposit Protection Plan (MFDPP) gives you insurance benefits, returns on your premium and tax rebates.

2. Tax Saving Investment Options for Married Couples

Married couples planning to start a new family or who already have children or other dependents such as elderly parents would do well to invest in different investment vehicles. Investing in a savings and insurance plan grows your money as well as provides life coverage. However, make sure you don’t exceed the allowable investment limit of 25% per person if you want to get tax benefits.

3. Tax Saving Investment Options for Parents

Investing in Education Insurance Plans protects your child’s future while safeguarding them from life’s uncertainties. My Child's Education Protection Plan (MCEPP), is one of the education insurance plans under MetLife to ensure your child’s higher education and helps you lead a stress free life. Tax rebates are available for premiums paid for insurance plans (in accordance with Bangladeshi Income Tax Ordinance, 1984.)

4. Tax Saving Investment Options for Senior Citizens

Bangladeshi senior citizens can take advantage of specific bank savings accounts, the Pensioner’s National Savings Certificate or retirement insurance policies. MetLife’s LifeLine policy lets you build a stable income for your golden years while benefiting from Income Tax savings on paid premiums. The plan provides a regular income for living and medical expenses when you retire.

Frequently Asked Questions (FAQ)

Which investment instruments are tax-free?

There are no investment instruments in Bangladesh that are 100 percent tax-free. However, investors can benefit from tax rebates by investing up to 25% of their annual disposable income in various savings vehicles.

Do I have to pay taxes on investments?

Bangladeshi citizens start paying taxes on investments when their income exceeds BDT 300,000 according to the Income Tax Ordinance. This tax-free limit is applicable to all individual taxpayers with the ceiling being higher for females, senior citizens, wounded freedom fighters and members of the third gender. Your tax advisor will provide you with the necessary information when paying taxes on investments.

How many tax-free investment plans can one have?

You can have as many tax-free investment plans as you want. However, you’ll still be liable for paying taxes when your overall income exceeds the tax-free limit in accordance with Bangladeshi tax laws.

How will I be able to pay less tax on higher income?

The investment tax rebate for high-income taxpayers in Bangladesh allows them to pay fewer taxes. Investing in insurance plans with higher premiums also gives you more tax rebates, allowing you to save more with these investment instruments.

How can I reduce my taxes legally?

Working with a reputable tax advisor will help you reduce your taxes legally. Investing in recognized investment instruments will also help you reduce your tax and these include the following:

-          Life insurance (tax rebates on premiums)

-          Stocks and mutual funds

-          National Savings Certificates

-          Provident funds

-          Group insurance funds

-          Donations to welfare and super annuity funds

-          Donations to government Zakat fund

It’s important to submit your tax returns timeously to benefit from rebates. Failure to submit your tax return on time will result in rebates being halved, increasing the payable tax amount.

What are the savings and investment plans at MetLife Bangladesh?

At MetLife Bangladesh, we offer a range of savings and investment plans that include insurance coverage. Tax rebates are applicable on premiums paid towards the insurance component of the plan. Investing in any of the following policies will help you grow wealth while having life cover at the same time:

- Income Growth Plan: A unique plan for achieving financial goals while having death and maturity benefits and the option to add personal accidental coverage.

- Three Payment Plan (3PP) Plus: Provides both high insurance protection and attractive returns on paid premiums. A flexible range of terms and the option to add valuable riders including personal accidental coverage makes this plan a worthwhile investment.

- MetLife’s Depositor’s Protection Scheme (MDPS): A combination of life insurance, savings and health protection makes this policy an all-rounder for investors securing their family’s financial future.

- MetLife Fixed Deposit Protection Plan (MFDPP): MetLife Fixed Deposit Protection Plan (MFDPP) allows you to enjoy world-class insurance benefits with affordable one-time premium payment. This policy is very convenient as you don’t have to pay multiple premiums.

- Endowment Plan: A plan that incorporates both savings and life insurance components, you can benefit from cash values, paid-up values, and extended term insurance values as well. Loans of up to 85% of the cash value are available and bonuses (if applicable) increase your payout amount.

- Takaful DPS: Based on guidance from the Shariah Council, it has been developed for everyone looking for financial securities driven by Islamic/Shariah considerations. MetLife’s Takaful DPS has been developed in three separate packages: Gold, Silver and Bronze. All the packages offer insurance protection and a savings plan that provides maturity value, among other Benefits, in a Shariah compliant way.