As Finance Minister Nirmala Sitharaman is all set to present the Union Budget 2022 on February 1, banks have proposed lowering fixed deposit (FD) tenure. Banks have proposed to lower tax FD tenure to three years for availing tax benefits, news agency PTI reported.
“As compared to other financial products (such as ELSS) available in the market, the tax-saver fixed deposit (FD) has become less attractive and if the lock-in period is reduced, this would make the product more attractive and provide more funds to the banks,” IBA said in a pre-Budget proposal submitted to the government according to PTI.
Tax-saving FD scheme
5-year tax-saving FD scheme is among the instruments that qualify for a deduction of up to ₹1.5 lakh under Section 80C.
Tax deducted at source (TDS) will be applicable on the interest rates of bank FDs, Interest earned on tax-saving FD is taxable in the hands of the investor. Interest on bank FDs can’t be claimed as a deduction under Section 80C.
Other demands of banks from FM Sitharaman’s Budget 2022
1) Special rebates or additional depreciation for expenditure made on financial inclusion activities and promoting digital banking, among other activities.
2) Special dispute resolution mechanism for faster disposal of cases related to taxation.
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