Bankers seek slew of tax incentives in next Budget
New Delhi: Bankers Monday demanded tax sops like increasing the TDS limit on fixed deposit to Rs 25,000, incentives for investment in infrastructure bonds and a reduction in the lock-in period for tax saving deposits to three years.
In their pre-budget consultations with Finance Minister P Chidambaram, bankers also sought permission to issue tax-free bonds like other financial institutions for raising funds and augmenting business.
Representatives from 22 banks and financial institutions pitched for increasing the TDS limit on fixed deposit to Rs 25,000. At present, tax is deducted at source on interest earned from fixed deposits of Rs 10,000 and above.
They also sought tax exemption of Rs 20,000 under Section 80CCF for investing in infrastructure tax free bonds and suggested inclusion of housing sector in the infrastructure segment.
After the meeting with the Finance Minister, SBI Chairman Pratip Chaudhuri said: "There was a requirement that this lock-in period on tax savings deposits be reduced from five years to three years to bring it in line with tax saving ELSS (equity linked saving schemes)".
While seeking transparency in gold and real estate transactions at par with equity transaction, bankers suggested that any restriction on gold import should be done carefully and in a calibrated manner.
"Gold import has also a co-relation with jewellery export. So if we try to bring down gold import, it could also affect jewellery export," Chaudhuri told reporters
Chidambaram in his opening remarks said: "Without vibrant and viable financial market architecture, there cannot be any sustainable economic growth. Efficient intermediation by financial markets lead to higher economic growth by increasing savings and their optimal allocation for productive uses".
Chidambaram said financial institutions have the capacity to promote economic growth as they allocate savings to those investments which have potential to yield higher returns.
Major steps have been taken to reform India's regulatory framework in line with international best practices, he said, adding that the country is now one of the most vibrant and transparent markets in the world.
Other suggestions made by the bankers include extension of agriculture interest subvention scheme to self-help groups and exemption of social security insurance schemes from service tax.
"Some of the banks...Made a request that they should also be allowed to issue tax-free bonds as has been allowed to other financial institutions because banks have good distribution network and can finance infrastructure projects," Chaudhuri said.
Bankers who attended the meeting include, Indian Overseas Bank CMD M Narendra, UCO Bank CMD Arun Kaul, Punjab National Bank CMD K R Kamath, ICICI Bank MD Chanda Kochhar, Axis Bank MD Shikha Sharma and Chairman of IDFC Ltd Deepak Parekh. Besides, RBI Deputy Governor K C Chakrabarty also attended the meeting.
Chaudhuri said that banks suggested that either Security Transaction Tax (STT) should be abolished on equity market or Commodity Transaction Tax (CTT) should be imposed on commodity trading to attract investment in the capital market.
"...Much of the money which could have been invested in the stock market is now going into this commodity market. Either you have a commodity transaction tax or you abolish the STT," he said.
Banks also suggested that some tax concessions should be given for issuing perpetual bonds, which is counted as Tier I or equity capital.