Need to increase income tax exemption limit to Rs 3 lakh: SBI report

23 Jan 2018 Evaluate

The State Bank of India (SBI) in its report titled ‘Union Budget: If wishes were horses!’ has stated that there is a need to increase the income tax exemption limit by Rs 50,000 to Rs 3,00,000, as the implementation of 7th Pay Commission has increased the personal disposable income. It noted that due to such move, around 75 lakh tax payers will be exempted from income tax. Besides, it pointed out that if the exemption limit of interest payments under housing loan is increased to Rs 2,50,000 for existing home loan buyers, from Rs 2,00,000 now, it will benefit 75 lakh home loan buyers and cost the government just about Rs 7,500 crore.

The report also pitched for incentivising savings through bank deposits. In an effort to incentivise savings, it said that the government can exempt interest of savings bank deposits. It also pointed out that the exemption limit on TDS on interest on term deposits with banks may be raised from the present limit of Rs 10,000 per annum. Also, it said that the lock-in period for tax savings term deposits needs to be reduced to 3 years from the present 5 years and these deposits should be brought under EEE (exempt, exempt, exempt) tax regime.

The SBI report further said that budget should give more priority to agriculture, MSME, infrastructure and affordable housing. It indicated that agriculture reforms should aim at re-examination of legally created structures whose provisions are restrictive and create barriers to free trade. Talking on the investment revival, the report said that capital subsidy in case of delayed projects equal to cost overrun may be provided. It added that cost overrun may be funded at concessional interest rate by the government in such cases.

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