Income tax, TDS relief in Budget could bump up bank deposits by up to Rs 45,000 crore, says financial services secy

In the Budget, which was presented connected Saturday, Finance Minister Nirmala Sitharaman announced hikes successful taxation deducted astatine root (TDS) thresholds for elder citizens and others, isolated from further sweetening the New Tax Regime (NTR) by mode of a chopped successful taxation rates and an summation successful rebates.

These measures are bound to permission much wealth successful the hands of people, which they whitethorn spend, invest, oregon save. The government, connected its part, is not being prescriptive connected what taxpayers should bash with their taxation savings, and is of the presumption that taxpayers’ gains would beryllium ploughed backmost into the system either by mode of higher consumption, investments, and adjacent savings.

As per the income taxation proposals announced successful the Budget, portion those with yearly taxable income of up to Rs 12 lakh volition person nary taxation liability, those with higher incomes volition person savings of up to Rs 1.1 lakh connected relationship of complaint rationalization nether the NTR. On the TDS front, the Finance Minister announced that the threshold for TDS connected involvement income volition beryllium doubled to Rs 1 lakh for elder citizens, and hiked to Rs 50,000 from Rs 40,000 for different individuals. This means that banks volition not deduct taxation up to an yearly involvement income of Rs 50,000 for non-senior national depositors, and up to Rs 1 lakh for elder citizens.

“Since TDS straight influences fixed deposit behavior, we are expecting, based connected immoderate calculations, small much than RS 15,000 crore further deposits (from elder citizens) successful banks… Based connected our methodology, we expect astir Rs 7,000 crore successful further deposits (in from non-senior citizens,” Nagaraju said.

Currently, elder national deposits are astir Rs 34 lakh crore. The full deposits successful the banking strategy stood astatine Rs 221.5 lakh crore arsenic of January 10, 2025.

The Financial Services Secretary said that the slab changes and higher tax-free rebate nether the NTR could pb to astir Rs 20,000 flowing into the banking system, adding that successful his discussions with banks aft the Budget announcements, they expressed expectations of higher deposits owed to the measures announced.

“We are expecting astir Rs 20,000 crore volition travel backmost to the banks. This (tax saving) is an further income and everybody volition not walk that. They volition astatine slightest support it for immoderate clip arsenic fixed deposits…So unneurotic we expect betwixt Rs 40,000 crore to 45,000 crore further slope deposits into the system. With this, the banks volition beryllium capable to lend more,” Nagaraju said.