Mutual fund investment has gained momentum in the last few years. From small to large investors, all are investing in mutual funds through SIP. This has had a direct impact on fixed deposits (FDs), which has led to a decline in the number of FD holders. This has created liquidity problems for banks. To address this problem, former RBI governor Shaktikanta Das had suggested banks to promote deposits by coming up with new products. Now there are reports that Budget 2025 may have some announcements to make FDs more attractive, such as income tax rebate on FD investments of 3 years instead of 5 years and tax relief on income from FDs. Experts from the banking and finance sector have also given many suggestions to the Finance Minister in this direction. The Budget for the financial year 2025-26 will be presented in Parliament on February 1.
Opportunity for banks to increase savings To boost savings, banks and financial institutions have sought tax incentives on fixed deposits in the upcoming Budget. The suggestion was made at a meeting with Finance Minister Nirmala Sitharaman in view of the recent fall in savings rates. According to media reports, during a meeting, suggestions were also made to improve the efficiency of the capital market and promote inclusion. Suggestions were also made for bonds and equity shares to encourage long-term savings. The meeting was also attended by the Finance Secretary, DIPAM Secretary, Secretary, Department of Economic Affairs and Financial Services, and the Chief Economic Advisor.
Possible announcements
A special fund can be set up through organisations like SIDBI and NABARD for MSME small borrowers and eco-friendly initiatives such as electric vehicles. This arrangement will be similar to the National Housing Bank model for housing finance companies. Besides, it has also been recommended to bring small NBFCs under its ambit by reducing the limit under the SARFAESI Act from Rs 20 lakh. Bank representatives have suggested linking long-term capital gains tax to fixed deposits so that more people are motivated to invest their savings in FDs. In the current situation, people are reluctant to invest in FDs due to income tax on returns from FDs.
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