New Delhi. It seems that the days of bank FDs are going to be better again. When the government presents the Budget 2025 on February 1, there is a possibility of getting a big relief on it. Currently, tax is levied on the interest received on bank FDs (Fixed Deposit) according to the income tax slab of the taxpayer. Banks have appealed to the government to abolish this income tax on FDs. If this happens, the common man will get a huge profit on getting FD.
In a meeting with Finance Minister Nirmala Sitharaman before the budget, financial institutions, especially banks, have suggested tax incentives on FDs to promote savings. In recent times, banks have faced problems in getting funds to disburse loans amid a decrease in savings. To avoid this in the future and to make people invest in bank FDs again considering them a profitable deal, it is necessary to give them some incentives.
Convenience sought on bonds and shares too
Radhika Gupta, Managing Director and Chief Executive Officer (CEO) of Edelweiss Mutual Fund, also gave suggestions regarding improving the efficiency of the capital market and increasing capital market inclusion during the pre-budget meeting with the Finance Minister. She said that recommendations have been made to encourage long-term savings i.e. both bonds and equity shares. Finance Secretary and DIPAM (Department of Investment and Public Asset Management) Secretary, Department of Economic Affairs and Financial Services Secretary and Chief Economic Advisor also attended this meeting.
Long term capital gain tax will be levied on FDs.
Sources say that bank representatives have suggested linking FDs with long term capital gain tax (LTCG) instead of taxing them according to the income tax slab, so that deposits can be encouraged. Currently, income tax is levied on returns received from fixed deposits. Due to this, people invest their savings in low tax options like mutual funds instead of investing in fixed deposits.
How to get the benefit
Suppose you have made an FD of Rs 10 lakh and you are getting 8% annual interest. You got a total interest of Rs 4 lakh on this FD made for 5 years. Suppose you fall in the 30% income tax slab, then there is no tax on the interest of FD up to Rs 40,000, above that you will have to pay tax as per the slab. This means that you will have to pay 30% tax on Rs 3.60 lakh. In this way, you will have to pay Rs 1 lakh 8 thousand only as tax. If LTCG is applicable on this, then you will have to pay a lump sum tax of 12.5% and the total tax will be only Rs 45,000. In this way, you will save about Rs 63,000.
