SBI Chairman Khara Advocates for Tax Relief on Interest Income in Upcoming Budget

SBI Chairman Khara Advocates for Tax Relief on Interest Income in Upcoming Budget

Sub: Economy

Sec: Monetary Policy

Key Proposal:

• SBI has proposed tax relief on interest income.

The rationale is that this relief would help banks attract more savings which could then be utilized for funding long-term infrastructure projects.

Current Tax Scenario:

• Banks are required to deduct tax when the interest income from deposits across all branches exceeds ₹40,000 in a year.
• For savings accounts, interest earned up to ₹10,000 is exempt from tax.

Khara’s Argument:

• Providing tax relief on interest earnings in the Budget would incentivize depositors.
• This, in turn, would enable the banking sector to mobilize deposits for capital formation in the country.

Budget Expectations:

• The Full Budget for 2024-25 is expected to be presented by Finance Minister Nirmala Sitharaman next month.
• Given the current economic growth rate, Khara anticipates a 14-15% loan growth for FY24-25.

Significance:

• Tax relief on interest income could potentially enhance the savings rate among the population.
• Increased savings would provide banks with more funds to support long-term infrastructure projects, crucial for economic development.

Conclusion:

• Khara’s proposal highlights the need for fiscal measures that could boost the banking sector’s capacity to fund critical infrastructure, thereby fostering economic growth and development.