Banks seek tax breaks for contact-intensive industries and higher home loan repayments from government

Banks have asked the government to consider tax breaks for contact-intensive industries hit by the pandemic amid fears of building up stress after the third wave ahead of the Union budget next month. Hospitality, aviation, travel and tourism, among other sectors, have been hardest hit by the spread of coronavirus, bankers have said CNBC-TV18 spoken, adding that any relief would be welcome.

“We have asked the government to consider giving tax breaks to contact-intensive sectors, especially the hospitality sector. If no support is given to some of these sectors, they will slip into the NPA,” explained a seasoned banker in the know.

This person added that the Indian Banks Association submitted a list of considerations to the government ahead of the union budget. This also includes a higher tax benefit for home loans.

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“Tax relief on home loans today is very low. House prices have also increased over the years, and an overhaul is needed, this will also help credit demand for home loans,” said a banking executive who declined to be named.

The IBA has once again raised the issue of reducing the fixed deposit (FD) lock-up period from five years to three years to qualify for tax breaks to make FD products more competitive. “We’ve been asking for this 3-year FD issue for a long time, and we’ve brought it up again this year. Let’s see if it’s being considered,” said one of the bankers quoted earlier.

In addition, banks have also sought tax incentives for spending on “public good” activities such as financial inclusion and promoting digital banking. The banking association also raised the issue of fiscal parity between foreign and domestic banks. Foreign banks mainly operate through branches in India and are subject to a corporate tax rate of 40%, as well as surcharges and additional taxes. Domestic banks, on the other hand, have to pay a 22% corporation tax, as well as a surcharge and tax. “It was also pointed out to the finance ministry earlier. Hopefully this budget can solve the problem,” a senior banker said.

Union Finance Minister Nirmala Sitharaman is expected to present the Union budget for 2022 on February 1. The Minister of Finance has already held a series of pre-budget meetings with heads of the business and finance sectors.

(Edited by : Jomy Jos Pullokaran)