The State Bank of India (SBI) has issued a new report urging tax reforms in response to a notable decline in bank deposits. The report emphasizes that tax reforms for deposits could elevate the banking system’s stability and resilience.
SBI attributes the decrease in deposits to the varying rates of return offered by different investment options over similar time frames and inconsistent tax rates on returns. For example, a bank deposit of Rs 10 lac in a Savings Bank (SB) account at a 3 per cent return would generate net returns significantly lower after taxes and exemptions.
In contrast, other investment opportunities like term deposits, debt funds, and equity options show more lucrative net returns due to different tax treatments. This disparity is causing investors to opt for alternatives, posing a risk to deposit growth within the banking sector. The ANI report further underscores the need for immediate tax reforms to address these inconsistencies.
