High-value term deposits in banks may not be subjected to tax deducted at source (TDS) if the finance ministry agrees to proposals made by banks on Thursday.
In a pre-budget meeting with Finance Minister Pranab Mukherjee, bankers proposed that the limit on interest from deposits beyond which TDS is required to be deducted be increased from Rs 10,000 to Rs 50,000 considering the surge in volume of transactions and inflation over the last few years.
It was also said that there was a case for increasing the credit to GDP ratio in India. Bankers highlighted the need to divert other kinds of savings to banks, arguing that India’s savings rate was about 32 per cent but only one third of it reached the banks.
The banks also a taxation window for pension funds and long-term funds. A demand was made to make banks eligible to issue tax-free infrastructure bonds. They also called for abolition of the Securities Transaction Tax. Some bankers said borrowers should be incentivised to convert jewellery into assessed gold.
“Other financial savings like real estate and gold have to be diverted to banks. Home loan and priority sector need more prominence,” said M Narendra, CMD, Indian Overseas Bank. “People are hesitant to convert their jewel into assessed gold. They should be incentivised for doing that so idle gold can come back to the system.”
Mukherjee said the growth rate would be around 7.2 per cent during the current year. Beside the finance minister, Minister of State for Finance Namo Narain Meena, advisor to FM, secretary (economic affairs), secretary (expenditure), secretary (financial services), secretary (disinvestment), chief economic advisor and CBDT chairman were present in the meeting.
The meeting was attended among others by RBI Deputy Governor K C Chakraborty, chairperson/CMD of various banks and financial institutions, including Prakash Bakshi from Nabard, R V Verma from National Housing Bank, Pratip Chaudhuri from State Bank of India, D K Mehrotra from LIC, Chanda Kochhar from ICICI Bank, K R Kamath from Punjab National Bank, T C A Ranganathan from Exim Bank, Naina Lal Kidwai from HSBC, S K Goel from IIFCL, Sunder Rajan Raman from Canara Bank, R M Malla from IDBI, Arun Kaul from UCO Bank, Shikha Sharma from Axis Bank, Rana Kapoor from Yes Bank and A R Sekar from New India Assurance Co Ltd.
Kotak Mahindra Bank Vice-chairman and MD Uday Kotak, IFCI CEO Atul Kumar Rai and Raman Aggarwal from FIDC also attended the meeting.