New Delhi: Banks and financial institutions today pitched for increasing tax deduction limit to Rs 2.5 lakh from currently Rs 1.50 lakh under 80C of Income Tax Act and bringing down maturity period for tax-free fixed deposit schemes to one year to promote domestic savings.
During their pre-Budget meeting with Finance Minister Arun Jaitley, they also demanded tax should be deducted on interest of above Rs 50,000 as against current Rs 10,000.
In his opening remarks, Jaitley said there was considerable improvement in the opening of Basic Savings Bank Deposit Accounts (BSDAs) in 2015-16 following launch of Pradhan Mantri Jan Dhan Yojana (PMJDY).
He also said the setting-up and structure of Bank Board Bureau will help in performance Public Sector Banks. After the meeting, HDFC Bank Managing Director Aditya Puri said certain tax specific suggestions were made so as to encourage domestic savings.
"One major point that came out of the meeting was the overall savings in our country needs to be increased much further through a series of actions that needs to be taken so that we have domestic savings to create capital formation," Yes Bank Managing Director Rana Kapoor said.
Suggestion regarding enhancing limit to Rs 2.5 lakh or Rs 3 lakh under section 80C were made, Kapoor said, adding it was proposed to bring down lock-in period on tax free fixed deposits to one year from 5 years so that more depositors come into the system.
According to Finance Industry Development Council Chairman Raman Aggarwal from banking perspective there was unanimous demand to increase 80C limit from the current level of Rs 1.5 lakh to Rs 2-2.5 lakh.
It was also discussed putting affordable housing in priority sector with infra status.
Puri also said the key issues were how to address growth and how to address the fact that given the reduction in nominal GDP there is a reduction in tax collection. "Everybody was of consensus that public expenditure is necessary and if that is necessary then a balance will have to be done between fiscal deficit and expenditure and may be it has to be delayed," Puri said.
Government has taken various steps to boost public investment through scheme like Pradhan Mantri Krishi Sinchai Yojana, Rashtriya Krishi Vikas Yojana and Pradhan Mantri Gram Sadak Yojana to boost the overall rural economy.
GST will see the light of the day and the Bankruptcy Bill will also turn out to be a game changer for spurring economic activity and confidence, Kapoor added.