Income Tax Relief Worth 35,000 Crores Could Be Announced In Budget: SBI

When Finance minister Arun Jaitley will present his fourth Budget on February 1, the most challenging task for him would be to revive the demand in the economy, which has been hit by the demonetisation of high denomination currency notes. The demonetisation had sucked out 86 per cent of the currency bills from the economy, hurting the demand in a consumption driven economy. According to the research department of country's largest bank, State Bank of India (SBI), this could be achieved by giving a number of tax and interest rate exemption to taxpayers.

Here are five recommendations from SBI's research department:

1) The research agency has recommended an increase in the personal income tax exemption limit from Rs 2.5 lakh to Rs 3 lakh per annum.

 2) In last year's Budget, the government raised tax deduction under National Pension Scheme to Rs 50,000 under Section 80CCD (1), resulting in total deductions under Section 80C and Section 80CCD to Rs 2 lakh. For the next fiscal year, SBI has recommended an increase in the 80C deduction by least Rs 50,000 to Rs 2 lakh so that the total deduction under  Section 80C and Section 80CCD goes up to Rs 2.5 lakh.

(Read: Income Tax Cut Hopes Rise. How Much Can Be Saved If Exemption Limit Is Doubled)

3) SBI Research has recommended that the interest rate exemption on housing loan needs to be increased to Rs 2.5 lakh for existing home loan buyers for new as well as existing home buyers from the current level of Rs 2 lakh. There are around 75 lakh home loan buyers in the country, so the increase in home loan interest deduction from Rs 2 lakh to Rs 2.5 lakh will benefit them. This will cost the government around Rs 7,300 crore.

(Also Read: These 10 Transactions Will Get Reported To Income Tax Department)

4) To incentivize savings, the government should provide exemption in interest of savings bank deposits. The exemption limit on TDS on interest on term deposits with banks should be raised to Rs 20,000 per annum from the current limit of Rs 10,000 per annum.

5)    The lock-in period for tax-savings bank deposits needs to be reduced to three years from the current five years, and these deposits should be brought under EEE (exempt, exempt, exempt) tax regime. This will cost the government only Rs 3,500 crore, according to SBI.

According to the report, such giveaways will cost Rs 35,300 crore to the government. The tax exemptions could be " more than balanced by (revenue generated from) Income Disclosure Scheme-2 and cancelled note liabilities of RBI", it added.