Budget 2024: SBI seeks tax parity for bank deposits with other assets

Ahead of Finance Minister Nirmala Sitharaman presenting the Union Budget on July 23, the economic research department of the State Bank of India (SBI), in its latest report, has highlighted why it is vital to ensure tax equilibrium between bank deposits and other kinds of investment.

The report suggests that aligning tax structure of deposit interests with that of mutual funds and equity markets by applying a flat rate across various maturities would lead to a growth in bank deposit that, in turn, would strengthen the financial system and also boost household savings.

The report from SBI’s economic research department added that the revenue loss that the government would stand to face by taking such a step would be minimum.

According to the report, the “present dispensation for equity/MF holdings stipulate Short Term Capital Gains tax at a flat rate of 15% while the Long-Term Capital Gains are taxed at a moderate 10%, with exemption allowed till income of LTCG up to one lakh during a given FY”.

The economic research department noted that “the setting-off of loss against profits and carrying over the loss up to next eight years make the opportunity cost of such alternate investments quite lucrative”.

Household net financial savings dropped to 5.3 per cent of GDP in the fiscal year 2022-’23, or FY23, the report observed, and predicted that FY24 results would see the rate rise to 5.4 per cent. CASA — or Current Account, Savings Account — and household financial savings could see a surge if deposit rates were increased, the report from SBI’s economic research department added.