The government has made it very easy to have your tax refund split and deposited into different types of accounts and is commonly termed as split tax refund. This process is very convenient and can be easily done. You just need to provide different bank account details and the amount of money for each account and the government will take care of the rest. This means that you will not need to do any of this work on your own. This avoids the hassle of splitting and depositing the money yourself and thus it gives you the convenience.
You can save more
You can save more when you plan better. Split Tax refund helps you plan your money better. Since you can deposit tax refunds in up to three different accounts, you can split the money according to your needs. For instance, let’s say you receive a refund of Rs. 10,000. You don’t want all of the money available to you for spending.
Assuming that you want Rs. 2,000 for immediate spending and the rest as savings, you can have the money split. Let’s say you transfer Rs. 2,000 in your checking account, Rs. 3,000 in your savings account and Rs. 5,000 in securities. Since you will not have all the money readily available for spending you can save more.
You will be able to manage your money better
Saving the money is not the only concern. Managing the money in such a way that it serves your future financial needs is also important. A better money manager never keeps all the money in one account. Different amount of money is deposited in different types of accounts. Since the government is offering split tax refund, you can have your money transferred to three different accounts of your choice. This will definitely help you manage your money better.
There is some peace of mind too
If you are someone who likes to spend a lot and anything that comes to your checking account is spent till the last cent then split tax refund is a much better option for you.If you know that you will end up spending all the money in your checking account, the split will make sure that you are able to save more than spending. You can have a part of the money transferred to your checking account for spending and the rest can go to other types of accounts for future use.
Remember that split tax refund involves lots of paperwork
Split tax refund definitely has many benefits but there are some drawbacks too. If you are someone who does not like too much of paperwork then it’s not good news for you. Three different accounts mean thrice as much of paperwork. This is the reason why a lot of people do not go for split tax refund.
Apart from paperwork, there may be some security concerns as well. While filling out the paperwork, you will need to mention all the three account details. If you are not too keen on doing that, you may have all the money transferred to one account and split it yourself.