A reduction in the tenure of tax saving fixed deposits and a sharp hike in the cut-off limit for deducting tax at source on interest earned on deposits are among the suggestions banks have made to the Finance Ministry for incorporation in Budget 2015-16.

To make fixed deposits more attractive and on par with equity-linked savings schemes and mutual funds, banks want the lock-in period on deposits that are eligible for tax savings under Section 80C of the I-T Act to be reduced to three years from five years.

Under Section 80C, premiums towards life insurance and unit-linked insurance plans, subscriptions to public provident fund, investments in National Savings Certificate and Equity Linked Savings Scheme, and repayments of the principal amount in a home loan qualify for deduction (up to a maximum limit of ₹1.5 lakh) from a tax payer’s gross total income—the tax liability can be reduced by ₹1.5 lakh.

Banks want the limit for deducting tax at source (TDS) on interest from term deposits upped from ₹10,000 to ₹50,000. Currently, banks are required to deduct TDS at 10 per cent in case interest payable on deposits exceeds ₹10,000 in a year.

PAN declaration In the absence of a Permanent Account Number (PAN), declarations for non-deduction of tax at source in Form 15G or in Form 15H cannot be acted upon by banks. Therefore, interest earned by the economically weaker sections, the aged and the infirm becomes subject to tax deduction at the higher rate of 20 per cent.

Hence, banks should be allowed to act upon declarations in Form 15G or Form 15H and not deduct tax even in the absence of a PAN. This will alleviate the hardship caused to customers.

Form 15G is a self-declaration form submitted by individuals below 60 years to banks stating that their income is below the taxable limit. Form 15H is submitted by those above 60.

Since banks are required to frequently raise funds in view of growing business volumes and to meet capital adequacy norms laid down by the Basel committee, they have pitched for incidental expenses, such as stamp duty and arrangers’ fees, incurred for raising equity capital be allowed as deduction.

Sale of NPAs When banks sell properties pledged to them to recover loan arrears, such sale is subject to 1 per cent TDS, resulting in the recovery getting reduced to that extent. Hence, banks have sought exemption from TDS when it comes to sale of immovable properties for making recoveries.

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