Financial institutions, especially banks, have suggested tax incentives for fixed deposits in the upcoming budget to promote savings. This suggestion was made in a pre-budget meeting with Finance Minister Nirmala Sitharaman on Thursday amid a decline in savings in recent times. Radhika Gupta, Managing Director and Chief Executive Officer (CEO) of Edelweiss Mutual Fund, said that during the pre-budget meeting with the Finance Minister, suggestions were also made regarding improving the efficiency of the capital market and increasing capital market inclusion.

Incentives for long term savings

He said that recommendations were also made to encourage long-term savings i.e. both bonds and equity shares. Finance Minister Sitharaman held a meeting with representatives of the financial and capital markets in connection with the preparations for the budget. This was the seventh meeting in this series. The meeting was attended by the Finance Secretary and DIPAM (Department of Investment and Public Asset Management) Secretary, Secretary of the Department of Economic Affairs and Financial Services and the Chief Economic Advisor. The budget for the financial year 2025-26 is to be presented in Parliament on February 1.

Get re-finance facility

Raman Agarwal, director of FIDC (Finance Industry Development Council), a body of non-banking financial companies, said the NBFC sector has advocated for green finance and refinancing facilities for electric vehicles. He said, "There is a strong case for providing refinancing facilities directly to NBFCs. A specific fund for environment-friendly initiatives like MSMEs, small borrowers and electric vehicles can be provided to organizations like SIDBI and NABARD. It should work in the same way as the National Housing Bank is doing in the case of housing finance companies. " In terms of revival, Agarwal said that some changes are needed in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act so that NBFCs can benefit from it.

Limit should be reduced under SARFAESI Act

He said that currently the limit under the SARFAESI Act is Rs 20 lakh. It can be reduced so that small NBFCs can come under its purview. Aggarwal also said that the government can consider removing TDS (tax deduction at source) on non-individual borrowers as this provision does not generate any additional revenue. According to sources, bank representatives suggested linking long-term capital gains tax with fixed deposits to encourage deposits. Income tax is levied on returns received from fixed deposits. This discourages people from investing their savings in fixed deposits.