The Indian Banks Association (IBA) has sought reduction in the lock-in period from 5 years to 3 years for tax benefits on Fixed Deposits.
The benefit of deduction is available on FD of 5 years.
Do you know that you can save tax by investing in Fixed Deposits? Under Section 80C of the Income Tax Act, if you invest in fixed deposits for 5 years, you will get the benefit of deduction. The limit of section 80C is Rs 1.5 lakh. Due to the decrease in the interest rate, the interest of investors towards FD is decreasing. In such a situation, before the Budget 2022, a demand has been made by the Indian Banks Association (IBA) to reduce the lock-in period for tax benefits on fixed deposits from 5 years to 3 years. He says that by reducing the lock-in period, the brightness of FD will return and investors will again increase investment in it.
The Reserve Bank has significantly reduced the interest rate, due to which the returns on fixed deposits, including savings, have come down. Due to low returns, the interest of investors towards FD has decreased. There has been an increase in the interest of investors towards other avenues of investment like ELSS. Banks say that due to less investment in FD, their liquidity is also being affected. If investment in fixed deposits increases, banks will have more funds for business. Exposing all these issues, a proposal has been placed before the Finance Ministry on behalf of the Indian Banks Association (IBA).
Interest remains intact for small savings schemes
The last meeting of the RBI Monetary Policy Committee was held in December. For the ninth time in a row, the Reserve Bank decided not to change the interest rate. At present the repo rate is 4 percent and the reverse repo rate is 3.35 percent. Due to lower interest rates, banks have also reduced interest rates on deposits. However, the interest rate on small savings schemes like PPF, Sukanya Samriddhi Yojana, KVP, NSC has not changed for the last several quarters. In such a situation, the interest of investors towards small savings schemes has not decreased that much.
Increased interest in equity market
The stock market and cryptocurrencies have made investors rich during the Corona period. In such a situation, traditional investors are also investing in mutual funds, direct stock markets and cryptocurrencies by withdrawing money from bank deposits and FDs. Due to this, there is a decrease in the deposits of banks.
Benefits of investing in PPF more than FD
The craze for 5 year fixed deposits for tax saving has come down drastically. In comparison, the craze of investors towards PPF remains intact. As we know interest income on FD is taxable. If the interest income exceeds 10 thousand in a financial year, then TDS of 10 percent is also deducted. Public Provident Fund ie PPF is completely tax free. Deduction is available on investment under 80C. Apart from this, both interest and maturity are tax free.
Also read, There is a boom in demand, but supply remains intact, crude oil may reach $100 this year
Also read, SBI alerts customers, if you want to avoid ATM fraud, then withdraw money through OTP, check the complete process here
.
