Nirmala Sitharaman
Financial institutions, especially banks, have suggested tax incentives for fixed deposits in the upcoming budget to promote savings. This suggestion was made in a meeting held on Thursday with Finance Minister Nirmala Sitharaman before the budget amid the decline in savings in recent times. Radhika Gupta, Managing Director and Chief Executive Officer (CEO), Edelweiss Mutual Fund, said that during the pre-budget meeting with the Finance Minister, suggestions were also made regarding improving the efficiency of capital markets and enhancing capital market inclusion.
Incentives for long term savings
He said that recommendations were also made to encourage long-term savings i.e. both bonds and equity shares. Finance Minister Sitharaman held a meeting with representatives of financial and capital markets in connection with the preparations for the budget. This was the seventh meeting in this series. The meeting was attended by the Finance Secretary and DIPAM (Department of Investment and Public Asset Management) Secretary, Secretary of the Department of Economic Affairs and Financial Services and the Chief Economic Advisor. The budget for the financial year 2025-26 is to be presented in Parliament on February 1.
Available re-finance facility
Raman Aggarwal, director of FIDC (Finance Industry Development Council), a body of non-banking financial companies, said the NBFC sector has advocated for green finance and refinance facility for electric vehicles. “There is a strong case for providing refinance facilities directly to NBFCs,” he said. A specific fund for MSMEs, small borrowers and environment-friendly initiatives like electric vehicles can be provided to organizations like SIDBI and NABARD. It should work in the same way as the National Housing Bank is doing in the case of housing finance companies.” In the context of revival, Aggarwal said that some changes will be made in the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act. There is a need so that NBFCs can benefit from it.
Limit should be reduced under SARFAESI Act
He said that currently the limit under SARFAESI Act is Rs 20 lakh. This can be reduced so that smaller NBFCs can come under its ambit. Aggarwal also said that the government may consider removing TDS (tax deducted at source) on non-individual borrowers as this provision does not generate any additional revenue. According to sources, bank representatives suggested linking long-term capital gains tax with fixed deposits to encourage deposits. Income tax is levied on returns received from fixed deposits. This discourages people from investing their savings in fixed deposits.
(With inputs from PTI/Language)
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