Tax relief on bank deposits

Govt is likely to give income tax exemption on deposits with the tenure of 365 days, reports KA Badarinath.

Finance Ministry is planning to give income tax exemption on bank deposits with the tenure of 365 days or more, but not more than three years. This will be within the over all limit of Rs 1 lakh exemption allowed currently.

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Personal savings in bank deposits would be treated by Income Tax Department on par with funds parked in Public Provident Fund (PPF), life insurance premium, post office savings and investments in mutual funds.

While sectoral caps on investment and savings avenues were removed in this year's budget, as a logical extension, Finance Minister P.Chidambaram may extend the bouquet of investment options to give the individuals wider choice for parking their funds, sources said.

If the move goes through, it will be announced with the next budget.