Increase in personal income tax exemption limit to Rs.2.5 lakh for savings sought

Increase in exemption limit to Rs.2.5 lakhs for savings under the Income Tax Act, interest rates on small savings schemes to be fixed at five-year government Security yields and an end to the dividend distribution tax — these are among the suggestions the Union Finance Minister Arun Jaitley received on Tuesday at a pre-budget consultative meeting with the representatives of banks and financial institutions (FIs).

The experts have also demanded that Corporate Social Responsibility (CSR) expenses should be treated as business expenditure for taxation purposes.

The suggestions received also include issue of off-shore INR bonds by banks for raising funds for infrastructure requirements, according to an official statement. The regulatory treatment of these bonds is sought to be at par with the domestic infra bonds guidelines, the statement said.

Other suggestions included broad based FDI in agriculture sector, the introduction of a new crop insurance scheme backed by technology and fully integrated financial inclusion and biometric authentication initiatives of the Government. The new crop insurance scheme, said the financial sector experts at the meeting, needs to be redesigned so that the compensation covers not only the cost of cultivation but also some part of the farmer’s prospective income.

Digitization of land records to compensate farmers swiftly, direct distribution of fertilizer subsidies to farmers through Direct Benefit Transfers and savings have also been sought. The savings thus accrued from the reduced leakages could be channelised for increasing public capex spending, it was recommended.

The alignment between G-Secs and small savings schemes rates could be done on a quarterly basis, the experts said. This is so that small savings rate does not become an impediment in the monetary transmission process.

It was also suggested that the Government focus on promoting growth and increase public spending till private sector investment in the economy picks-up. It could consider listing of non-life insurance public sector undertakings while retaining majority Government control, the experts said.

Amendment of Section 41 (4A) of the Income Tax Act to specify a period of retaining the transfer amounts in special reserves to fulfil the purpose of granting long term finance and release of capital in the financial system for deployment purposes was also sought.

In his opening remarks, the Finance Minister said that as part of the governance reforms in Public Sector Banks (PSBs), the Government Bank Board Bureau (BBB) will replace the Appointment Board for appointment of whole time directors as well as non-executive chairman. Government has replaced the earlier mechanism of statement of intent on annual goals for these banks with key performance indicators to make the targets generic and not bank specific so that the need to interact with bank is eliminated or minimised.

The pre-Budget consultative meeting was also attended by Minister of State for Finance Jayant Sinha, Finance Secretary RP Watal, Economic Affairs Secretary Shaktikanta Das, Revenue Secretary Dr. Hasmukh Adhia, Secretary, Financial Services Ms. Anjuly Chib Duggal and Chief Economic Adviser Dr. Arvind Subramanian.

Representatives of banks and financial institutions included Reserve Bank of India Deputy Governor Urjit Patel, SBI Chairman Ms Arundhatti Bhatacharya and Bank of Baroda Executive Director BB Joshi. Axis Bank MD&CEO Ms Shikha Sharma, CITI Bank CEO Pramit Jhaveri and HDFC Bank MD Adtiya Puri also attended the meeting.