Demand to increase tax exemption limit and including affordable housing in the priority sector
GN Bureau | January 13, 2016
A renewed focus on governance reforms in banking, thrust on increasing domestic savings and social security for children, women and senior citizens were core issues at yesterday’s pre-budget consultative meeting of finance minister Arun Jaitley with representatives of banks, financial institutions and social sector groups.
Jaitley said that as part of governance reforms in public sector banks, Bank Board Bureau will replace the appointment board for appointment of whole time directors as well as non-executive chairmen to formulate appropriate growth and development strategies. He said that the government has replaced the earlier mechanism of statement of intent on annual goals for public sector banks with key performance indicators to make the targets generic and not bank specific so that the need to interact with bank is eliminated or minimized.
Banks and FIs sought raising tax exemption limit to Rs 2.5 lakh, bringing down maturity period for taxfree term deposit to one year to promote domestic savings among other exemptions and putting affordable housing in the priority sector. There was also a demand for incentives for encouraging cashless transactions including through Debit/Credit cards, focus on promoting growth and increase in public spending till private sector investment picks-up.
Yes Bank managing director Rana Kapoor said the major point of the interaction was that overall savings in the country needs to be increased through a series of action to ensure domestic savings to create capital formation. "It was also suggested to bring down lock-in period on tax-free fixed deposits to one year from five years so that more depositors come into the system."
Other suggestions included that income which is subject to distribution tax and subsequently exempted in hands of recipient be excluded from the scope of the Section 14A of the Income Tax Act or distribution tax be abolished. Special regime of taxation for income distribution by securitization trust, the Income Tax Act be suitably amended to allow Corporate Social Responsibility (CSR) expenses as business expenditure and amendment of Section 41 (4A) of the Income Tax Act to specify a period of retaining the transfer amounts in special reserves to fulfill the purpose of granting long term finance and release of capital in the financial system for deployment purposes.
Jaitley in his meeting with social sector groups, said inclusive growth is high on the agenda and adequate measures can be expected to ensure social security for children, women and senior citizens.
Social sector groups asked for doubling of allocation towards the health sector and higher rate of sin tax on tobacco products and alcohol in the budget. They sought allocation under the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) be increased by Rs 5,000 crore and spending of 10% of GDP on the education sector. Other suggestions included insurance to farmers as a major initiative to address the distress in the agriculture sector and for achieving higher agriculture growth, and adequate provisioning towards a comprehensive and universal crop insurance scheme.
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