Ahead of the Budget 2025-26, financial sector and capital market representatives on Thursday said that in line with capital gains tax on stocks, fixed deposits, a dedicated refinancing window for non-banking financial companies (NBFCs), will be demanded a reduction in taxes on interest income. ) and incentives for long-term savings.
To help banks mobilize deposits amid a flight of funds from banks to capital markets, banks have proposed to Finance Minister Nirmala Sitharaman to treat income from fixed deposits on a par with capital gains tax on equity. Currently, FD’s income is taxed as per the applicable income tax slab rate and the marginal tax rate is 30% excluding cess and surcharge, the official said. However, the short-term capital gains tax rate for listed shares held for less than 12 months is 20%, while the long-term tax rate for held for more than 12 months is 12.5%.
After the Reserve Bank of India strengthened the emphasis on risk in bank lending to NBFCs, major NBFCs are now borrowing mainly from overseas, but many small and medium-sized NBFCs are borrowing from major NBFCs, which reduces the cost. is increasing, the FIDC director said. Raman Agarwal. “Therefore, there is a very strong case for a direct refinancing facility provided to NBFCs. A specific fund would be earmarked exclusively for refinancing NBFC loans against MSMEs, small borrowers, and green assets such as electric vehicles. “We can do that,” Agarwal said. Nabard or SIDBI could be the custodian of the refinance window to NBFCs.
Earn more interest on your EPF claim. Interest will be paid until the final settlement date
GST Council postpones insurance decision
fair interest rate framework
Fixed deposits for seniors in major PSUs and private banks earn returns of up to 8.75% in December
Radhika Gupta, MD and CEO, Edelweiss Mutual Fund, said suggestions were also made to improve the efficiency of the capital market and increase inclusivity in the capital market. He added that recommendations were also made to incentivize long-term savings, including both debt and equity.
Agarwal said some adjustments are needed in the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act to help NBFCs recover loans. He said that currently, the limit for admission in a suit for recovery under the SARFAESI Act is Rs 2 million, but it can be reduced to Rs 1 million so that small NBFC players can also be covered under this scope. He also said the government can consider removing tax deduction at source (TDS) for non-individual borrowers from NBFCs as no extra revenue will be generated from this provision. “There is no benefit for either the borrower or the lender. It is creating an operational nightmare,” Agarwal said.
NBFCs are the only financial institutions that are not exempted from TDS regulations.
Sitharaman chaired the seventh pre-budget consultations with financial sector and capital market stakeholders on Thursday. The meeting was attended by NSE CEO Ashish Kumar Chauhan, Gaja Capital co-founder Gopal Jain, HSBC Bank India CEO Hitendra Dave, and Bank of America’s Head of India and ASEAN Economic Research Rahul Bajoria. , Partha Pratim Sengupta, CEO of Bandhan Bank, and Financial Industry Development Council were present. (FIDC) Director Raman Aggarwal, HDFC Life Insurance CFO Niraj Shah, Edlewis MF CEO Radhika Gupta, Purnartha Investment Advisory Chairman Rahul Rati, HDFC Pension Management CEO Shriram Iyer, Devra Research Deputy ED Deepti George.
