Budget 2024 expectation: SBI Chairman proposes tax relief on interest earnings as incentive for depositors

Budget 2024: SBI Chairman  Dinesh Kumar Khara on Wednesday said the government should offer some tax relief on the income earned from interest as that would help banks boost their savings, which can be used to fund projects.

"If at all some relief could be given in the Budget regarding tax on the interest earnings, it will be an incentive to depositors. Eventually, the banking sector uses deposits mobilised for the capital formation in India," Khara told news agency PTI in an interview.

Bank deposits allow customers to save money at a bank for a set period. The financial institution pays interest based on the deposited amount and duration.

As per the taxation laws, banks deduct tax on interest income earned on deposits (in all the bank branches) when it exceeds Rs 40,000 a year. For a savings account, interest earned up to Rs 10,000 is exempt from tax.

Last month, the SBI increased the fixed deposit rate on select short-term maturity up to 75 basis points, which was done as "there's room for improvement," Khara noted.

The SBI anticipates a rise in deposit growth rate this fiscal year. Last year, it saw an 11% increase. The bank aims to achieve a 12-13% growth this year.

The preparation for the Union Budget has already started. Finance Minister Nirmala Sitharaman met leading economists in New Delhi today. The pre-Budget consultation meeting was attended by Union Minister of State for Finance Chaudhary; Finance Secretary; Secretaries of Departments of Economic Affairs, Revenue, Financial Services and Corporate Affairs; and Chief Economic Adviser, Government of India.