New Delhi: Indian banks reiterated their demand for higher tax deductions for provisions of bad debts as well as a reduction in the lock-in period for fixed deposits (FDs) from five years to three years to be eligible for tax deduction.
The demands were made at a pre-budget meeting with finance minister P. Chidambaram on Monday.
Banks also asked that interest on FDs for the purpose of tax deducted at source be increased to Rs.25,000 from Rs.10,000.
The lenders sought an extension of the interest subvention scheme for agricultural loans to term loans and loans to self-help groups, bankers said. Currently, interest subvention is available only to credit limits extended to farmers.
Some banks also sought the reintroduction of tax-saving bonds with a tax exemption of Rs.20,000, the finance ministry said in a statement.
Financial institutions asked for service tax exemption on services provided by business correspondents and for social security insurance schemes.
Non-banking financial companies (NBFCs) demanded parity with banks by extension of tax benefits available to banks such as tax deductions on provisioning to them as well.
“RBI (Reserve Bank of India) working group on NBFCs under Usha Thorat has recommended parity in tax treatment between banks and NBFCs. Hopefully, the government will agree to our demands,” said Raman Aggarwal, director, Finance Industry Development Council, a lobby group of non-banking financial companies.