Savings

Budget 2022: calculation of income tax on fixed deposits and other savings must be made as equity

Budget 2022 expectations for bank depositors: Interest on deposits should be taxed the same as publicly traded stocks, expert says.

Budget 2022 expectations of bank depositors: Given the low yields on term bank deposits and other savings schemes, many investors are attracted to risky assets these days. Experts believe that the 2022 budget should incentivize bank depositors in the form of tax breaks to curb this upward trend.

“Given the current environment of negative real interest rates and the low interest rates offered on bank deposits and interest on bank deposits being taxed at the applicable income slab rate with no income tax rate available as with some other asset classes, there is an inherent incentive for people to invest in risky assets to earn higher returns,” Abhishek Saxena, a partner at Phoenix Legal, told FE Online.

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“Therefore, to help people avoid such risky behavior, interest on deposits should be taxed in the same way as listed shares, with lower income tax applied to deposits held over a year and a higher rate applicable to deposits held for less than one year. ,” he added.

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Experts also believe that the next budget should provide tax incentives for employees in the form of improved deductions from wage income and tax savings on qualifying plans under Section 80C.

“We hope that the budget will be more attractive to encourage individual taxpayers. It is expected that the standard deduction for employees may be increased from Rs 50,000 to Rs 75,000 to relieve salaried staff,” said Mitesh Jain, Partner, Economic Laws Practice.

“A new allowance could be introduced for salaried staff who have worked from home during the pandemic. The budget is also expected to increase the investment deduction limit under Section 80C, the health insurance premium deduction under Section 80D and the interest on home loan deduction since the limits have not been increased over the past 5 years,” he added.

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Paras Nath, partner, tax and regulatory services at TR Chadha & Co LLP, said that as the country has started to recover from the third wave, there are high expectations for this budget.

“For individuals and the salaried part, the major expectation is the reduction of the tax burden either by lowering rates or by increasing the slab. In addition, an increase in the standard deduction and a simplification of the tax filing process by removing the complexity of choosing between the old and the new regime are also expected,” he said.

Finance Minister Nirmala Sitharaman will present the Union Budget 2022 on February 1.

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