The Finance Minister will present the Union Budget 2022 on 1st February 2022. Regarding the same, the banks have proposed lowering the tenure of tax-saving fixed deposits (FDs). As per the sources, the Banks have proposed to reduce the lock-in period of fixed deposits from five years to three years tenure for tax saving under Section 80C.
The Indian Banks’ Association (IBA) has highlighted in its pre-budget proposal to the government that the five-year tax-saving FDs have become less attractive than the other financial products available in the market. Hence, to align with ELSS, it proposes reducing the lock-in period to 3 years from 5 years, increasing its demand and providing more funds to the bank.
Investment in the five-year tax-saving fixed deposit scheme allows a deduction under Section 80C up to Rs 1.5 lakh. One can also invest in financial products like ELSS and claim a deduction under Section 80C up to Rs 1.5 lakh. However, the lock-in period in ELSS is three years, which is the lowest of all the instruments eligible under Section 80C.
Banks also seek special incentives in a special tax rebate or additional depreciation over and above the actual capital expenditure made on implementing various government schemes under financial inclusion and promotion of digital banking, among other activities.
It further appeals to set up a special dispute resolution mechanism for faster disposal of cases related to taxation and to reduce litigation between the tax department and the banks.
For any clarifications/feedback on the topic, please contact the writer at namita.shah@cleartax.in.
I’m a chartered accountant and a functional CA writer by profession. Reading and travelling in free time enhances my creativity in work. I enjoy exploring my creative side, and so I keep myself engaged in learning new skills.
