Banks Push for Fixed Deposit Tax Breaks Ahead of Budget 2025

Ahead of Budget 2025, banks propose tax breaks on fixed deposits, green finance incentives, and financial reforms to encourage savings, boost investments, and drive economic growth.

Discover how Budget 2025 proposals aim to boost savings with tax incentives on fixed deposits, support green finance, and drive economic growth with inclusive financial reforms.

Tax Incentives to Promote Savings

Financial institutions, particularly banks, have proposed tax incentives for fixed deposits (FDs) to encourage savings and economic growth.
Recommendations were made during a meeting with Finance Minister Nirmala Sitharaman and financial sector representatives.
The meeting addressed the decline in savings and explored measures to enhance financial inclusion and savings mobilisation.

Incentives for Long-Term Savings

Suggestions included stimulating long-term savings through bonds and equity shares.

Radhika Gupta, MD & CEO of Edelweiss Mutual Fund, emphasized making capital markets more efficient and inclusive.
Recommendations aim to enhance the capital markets ecosystem in the upcoming budget.

Banks Advocate for FD Tax Breaks

Bank representatives suggested linking fixed deposits with long-term capital gains tax to incentivize savings.
Interest earned on FDs is currently taxed as regular income, discouraging savings in these instruments.
Tax breaks on FDs could increase individual savings and boost banks’ deposit base.

Proposals from Non-Banking Financial Companies (NBFCs)

NBFCs highlighted the need for dedicated refinance facilities for green finance and electric vehicles.
Raman Agrawal, Director of the Financial Industry Development Council (FIDC), advocated for:
- Dedicated funds for NBFCs, similar to those for housing finance companies.
- Amendments to the SARFAESI Act to simplify asset securitisation and restructuring, particularly for small NBFCs.
- Lowering the SARFAESI Act limit from ₹20 lakh to enable smaller NBFCs to benefit.

Call for TDS Exemption on Non-Personal Borrowers

NBFCs proposed eliminating TDS (Tax Deducted at Source) on non-personal borrowers like companies and organizations.
This measure would ease financial burdens on businesses without impacting revenue generation.

Key Areas for Budget 2025

Tax incentives to encourage savings.
Support for green finance and electric vehicle funding.
Operational ease for NBFCs through legislative amendments.
Policies to motivate savings and investments, driving growth in housing, green energy, and capital markets.

Anticipation for Budget Outcomes

The financial sector awaits the government’s response to these suggestions.
Proposed measures aim to foster economic growth, enhance financial inclusion, and create a more robust savings culture.

Budget 2025 could transform savings, investments, and green finance, paving the way for inclusive growth and a stronger financial ecosystem.

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