Bank deposit taxation needs immediate parity with competitive routes: SBI’s environmental research

Parity on the taxation front for bank deposits (both demand and timing) compared to other investment avenues is an urgent need, as a select group of investors are turning to alternative asset classes whose returns have been better than bank deposits. Economic Research Department (ERD) of State Bank of India.

Based on its analysis, the ERD opined that the impact on the revenue left for the government from any such move would not be significant.

“The current regime for equity/mutual fund holdings prescribes short-term capital gains tax at a flat rate of 15 per cent, while long-term capital gains (LTCG) are taxed at a moderate 10 per cent, with exemption up to LTCG income. is allowed. Up to one lakh during a given financial year (FY),” SBI group economic advisor Soumya Kanti Ghosh said in the report on the introduction of the Union Budget 2024-25.

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Moreover, offsetting losses against profits and carrying the losses for the next eight years makes the opportunity cost of such alternative investments quite attractive, he said.

In line with the MF/equity markets, ERD suggested that the government should make changes to the ‘tax on deposit interest’ and give equal tax treatment across the maturity ladder.

Noting that household net financial savings are expected to decline to 5.3 per cent of GDP in FY2013 and 5.4 per cent in FY2014, the ERD said if deposit rates are made attractive in line with MFs, this will Household financial savings and CASA may increase. Current account, savings account).

Since this amount will be in the hands of depositors, it may lead to additional expenditure and thus the government will get additional GST (Goods and Services Tax) revenue.

Ghosh said the increase in bank deposits will not only bring stability to the core deposit base and the financial system, but will also bring financial stability to household savings as the banking system is better regulated and has better confidence compared to other alternatives with higher volatility/risk. .

Noting that deposits are taxed on accrual basis and other asset classes only on redemption, he said this disparity also needs to be addressed.

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