Tax payers used to a whole gamut of tax savings instruments are not ready to let go off all such exemptions and hope for extension of some and relaxation of limit under certain categories.
The Indian Banks' Association (IBA) moved its pre-budget memorandum early enough and from the industry perspective asked for ceiling on interest payment for fixed deposits eligible for tax deduction at source be hiked to Rs 10,000 from Rs 5000.
"When income tax is exempt for an annual income of Rs one lakh keeping the TDS limit at Rs 5000 creates unnecessary administrative work and expenses for banks," reasons an IBA official. IBA has also asked for the five-year lock in period for availing tax exemption on FDs under 80 C be brought down to three years. Further they said, "Permit loans against such deposits, so that it becomes an attractive product."
"Equity linked savings schemes of mutual funds look attractive against the bank FDs as only long term capital gains apply for ELSS with three year lock in, though FDs score on the basis of its safety," says chartered accountant Mehul Sheth. "Age limit to avail senior citizen concessions should be brought down to 60 from 65," says Sheth. The IBA has also explored the social security angle in the reverse mortgage scheme approved by national housing bank, few months ago. It has asked for removal of capital gains under reverse mortgage and making the EMI earned on it tax-free.
IBA also wanted tax on bank cash transaction abolished. Though a major irritant to both, finance minister has had an unexpected windfall from BCCT. "It is doubtful that this tax will be removed," said some accountants.
As far as the insurance industry goes, there is a danger looming large. That is, the move to bring life insurance payout under exempt exempt tax (EET) category making life insurance proceeds taxable. "It would be a big blow, a disincentive that goes against the social security nature of life insurance," said an insurance expert. Though, in agreement, all exemptions may go at some point. The payments out of the pension policies are taxed as income and industry has been representing that it should be removed.
Apart from the customer centric issues, the banking industry has also asked for change in norms to let them issue tax-free bonds and tax holidays for lending to infrastructure industry. They have also asked for level playing field for urban co-operative banks by either restoring the exemptions given under section 80 P or treating them on par with other commercial banks.
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