Easy Office
LCI Learning

Budget 2024: Savings Account Interest Up to Rs 25000 May Become Tax-Exempt

Last updated: 08 July 2024

The government is considering a proposal to increase the tax-deductible amount on interest earned from savings accounts to ₹25,000, sources familiar with the matter revealed. This proposal was suggested by banks during a recent meeting with key finance ministry officials.

Budget 2024: Savings Account Interest Up to Rs 25000 May Become Tax-Exempt

Key Points

  • Proposal Under Review: "It is under review, and there could be some relief for banks, which have demanded incentives to boost deposits," a government official stated. A final decision on the proposal is expected closer to the budget announcement.

  • Existing Tax Regimes: The 2020 budget introduced a simpler, separate income tax regime without exemptions, allowing taxpayers to choose based on their financial situations. Under the older tax regime, interest earned up to ₹10,000 annually from savings accounts is tax-exempt under Section 80TTA of the Income Tax Act. For senior citizens, this limit is ₹50,000, including interest income from fixed deposits under Section 80TTB. These benefits were removed under the new tax regime. However, under Section 10(15)(i), taxpayers can claim exemptions on interest from Post Office savings accounts up to ₹3,500 for individual accounts and ₹7,000 for joint accounts. Banks are advocating for these benefits to be available under both tax regimes.

  • Incentivizing Deposits: "Both the enhancement of the old limit and allowing interest income from savings accounts in scheduled commercial banks (SCBs) under existing regulations in the new regime are being considered," said a source. Banks argue for incentivizing deposits amid concerns over the widening credit-deposit ratio.

  • Credit-Deposit Ratio Concerns: The Reserve Bank of India's (RBI) latest Financial Stability Report indicated that households are diversifying their financial savings, allocating more to non-banks and the capital market. The report highlighted that the increasing gap is reflected in the rising credit-deposit (C-D) ratio, which peaked at 78.8% in December 2023 before moderating to 76.8% at the end of March.

  • CASA Deposits Decline: Earlier this week, HDFC Bank, the country's largest private sector lender, reported a 5% sequential decline in its current account-savings account (CASA) deposits to ₹8.63 lakh crore during the first quarter of the ongoing financial year.

Join CCI Pro



More »

Popular News