New Delhi: Ahead of the budget, the Association of Bank India (IBA) has made a new tone to reduce the locking period for fixed deposits (FDS) to qualify for tax relief from five years to three so that they can compete better with other products.
“Compared with other financial products (such as ELSS) available on the market, a fixed deposit of tax saver (FD) becomes less attractive and if the locking period is reduced, this will make the product more interesting and provide more funds to the bank,” said Iba said in Proposal submitted to the Ministry of Finance.
While the bank has cut deposit rates to continue the benefits of a lower level regime to borrowers, small savings products such as Providential Public (PPF) funds have not seen a tariff reduction for a few quarters, making it more interesting than the return point.
look.
Like that, the stock market boom in recent years has encouraged several investors to avoid bank deposits and move to mutual funds or direct investment in stocks.
As a result, apart from several senior citizens in higher income brackets, most of the other deposits are FD FID.
In fact, FD Bank for five years is made to qualify for tax breaks below the 80C section long later as part of the annual benefit of Rs 1.5 lakh available for certain investments.
Even with the benefit, it’s less attractive than, say, PPF as the interest obtained from this FDS is taxable.
IBA also looks for special rebates or additional depreciation for expenses for financial inclusion and digital banking.
“By issuing expenses for this, the Bank provides benefits for the masses, namely, the ease of doing business, digital banking, etc.
Therefore, some special incentives in the form of a special tax / tax deduction or additional depreciation (say, 125%) more than and Above the actual capital expenditure carried out in these activities can be given, “it has been proposed.
In addition, IBA has taken cudgels on behalf of foreign banks and pitched tax parity between their branches in India and the domestic bank.
Bank India selects a lower level option of 22% (plus additional costs and CESS), which is not available for foreign bank branches in India, which is subject to a tax of 40% (plus additional costs and CESS).
Most foreign banks choose not to include local subsidiaries and have chosen to operate through branch routes, even though it is driven by the government and the RBI.