Higher TDS Thresholds & Tax Cuts To Drive Rs 45,000 Cr In Bank Deposits: Financial Services Secy

New Delhi, Feb 4 (KNN) Financial Services Secretary M Nagaraju announced Monday that the income tax measures introduced in the Union Budget 2025-26 are projected to generate additional bank deposits of Rs 40,000-45,000 crore, enhancing banks' lending capacity and potentially easing sector liquidity constraints.

During a post-Budget media interaction, Nagaraju detailed how the tax initiatives presented by Finance Minister Nirmala Sitharaman on Saturday would contribute to this financial boost. 

The Budget's key provisions include elevated TDS thresholds for senior citizens and other individuals, along with modifications to the New Tax Regime (NTR) featuring reduced tax rates and increased rebates.

The government anticipates that these tax relief measures will provide individuals with greater disposable income, which they may allocate across spending, investment, or savings channels. 

Rather than prescribing specific uses for the tax savings, the administration expects these funds to naturally recirculate through the economy via increased consumption, investments, or savings vehicles.

Under the new tax framework, individuals with annual taxable income up to Rs 12 lakh will be exempt from tax obligations, while higher-income earners could realise savings up to Rs 1.1 lakh through NTR rate adjustments. 

Additionally, the TDS threshold for interest income has been doubled to Rs 1 lakh for senior citizens and increased to Rs 50,000 from Rs 40,000 for other individuals, effectively reducing tax deductions on bank interest earnings.

Nagaraju provided specific projections, indicating that senior citizens' deposits could increase by approximately Rs 15,000 crore, while non-senior citizens might contribute an additional Rs 7,000 crore. Current senior citizen deposits stand at Rs 34 lakh crore within the banking system's total deposits of Rs 221.5 lakh crore as of January 10, 2025. 

The NTR modifications, including slab changes and enhanced tax-free rebates, are expected to generate around Rs 20,000 crore in additional banking system inflows.

The Financial Services Secretary emphasised that these measures would strengthen banks' lending capabilities, noting that discussions with banking institutions following the Budget announcement revealed optimistic expectations regarding deposit growth. 

While acknowledging that not all tax savings would be immediately directed toward deposits, Nagaraju suggested that a significant portion would likely be maintained as fixed deposits, at least temporarily, contributing to the projected Rs 40,000-45,000 crore increase in system-wide deposits.

(KNN Bureau)