New Delhi: With Budget 2025 all set to be presented in Parliament on February 1, 2025, Confederation of Indian Industry (CII) has advocated for taxing interest income from deposit at a lower rate to attract the masses towards deposit schemes in banks.
CII also called for reducing the lock in period for fixed deposits with preferential treatment. While putting forward its suggestions, the industry body said bank deposits as a proportion of household financial assets fell from 56.4 per cent in FY20 to 45.2 per cent in FY24. It proposed lower tax on deposit interest and reducing the lock-in period for fixed deposits to spur growth.
Chandrajit Banerjee, Director General, CII, highlighted the weakening trend in household savings and noted that “low returns on bank deposits compared to other avenues such as equities and mutual funds, coupled with a higher tax burden on interest income, have made bank savings less attractive”.
The CII’s proposal comes at a time when data shows that crores of people have started investing majorly in mutual funds and stock markets and are less inclined towards traditional fixed deposit schemes.
The Association of Mutual Funds in India (AMFI) data released on January 9, 2025, stated that the assets under management (AUM) of the industry stood at Rs 66.66 lakh crore in December 2024. The number of folios jumped from 16.89 crore to 22.50 crore between January and December 2024. It may be noted that the investors continued to pump in money despite the Bull Run in stock market halted in October 2024.
The Systematic Investment Plan (SIP) investment in December 2024 peaked, reaching an all-time high of Rs 26,459 crore in December 2024. There has been a rising concern because of the investor preferences towards MFs which has made difficult for the banks to attract customers towards FDs.
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Ahead of Budget 2025-26, the Confederation of Indian Industry (CII) advocated for lower taxes on bank deposit interest and reduced lock-in periods for fixed deposits. This follows a decline in bank deposits as a proportion of household financial assets, with investors increasingly favoring mutual funds and equities. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
