AN area that needs a relook by the Central Government and calls for some relief is taxation of interest income on savings and fixed deposits from banks. For 2012-13, interest earned up to Rs 10,000 in saving bank accounts has been exempted from tax. However, interest income from other kind of deposits such as those from term deposits, fixed deposits, recurring deposits are however not exempted from tax. A few years ago, interest income up to Rs 12,000 per year was exempted under Section 80L of the Income Tax Act. Prior to financial year 2012 and after the removal of exemption of bank interest under section 80L, every rupee credited to one’s savings account was liable to tax.
As said earlier, interest income from other kind of deposits like those from term deposits, fixed deposits, recurring deposits are not exempted from tax. By including every small interest credited to the savings accounts, the Central Government is forgetting a cardinal principle of taxation, i.e., the Government should not impose a tax which it is unable to implement.
Now let’s talk about interests on fixed deposits. It a common fact that widows, sick and handicapped, senior citizens, pensioners etc. keep their funds and savings in fixed deposits in scheduled banks and cooperative banks on account of the twin reasons of safety and easy convertibility into cash. The small interest incomes received by them need to be exempted from taxation. So an exemption on interest on fixed deposits is called for on the part of the FM when he presents the Budget on February 28. These categories of tax payers need some relief in the backdrop of inflation eating into the interests received and the money deposited. The benefit that those categories of citizens get now is a pittance. The Finance Minister must not give huge tax benefits to the rich and powerful. Dear FM, kindly show small mercies to the widows, the old, the sick, the physically challenged and senior citizens in your forthcoming budget.
