[ITR] Tax exemption limit should be Rs 2 lakh
- Tax exemption limit should be Rs 2 lakh
This time around, the Budget will be presented amid heady inflationary winds and much jostling over the bills which are long pending before Parliament. The initiatives will be seen in the backdrop of the government making a desperate attempt to provide succour to the ululating common man. But apart from this, there are some banking-related issues waiting for some signals. These include a stand on domestic bank licences, capital gain tax on transition from a branch to a wholly-owned subsidiary of a foreign bank, besides a rollout of specific measures for mortgage and MFI sectors. As per RBI figures, aggregate deposits of scheduled commercial banks (SCBs) have increased from Rs 4,49,000 crore as of March 31, 2010, to Rs 4,97,000 crore as of December 10, 2010 —a growth of 10.6%. Also, bank loans have grown from Rs 3,24,000 crore to Rs 3,76,000 crore as of December 10, 2010 — a growth of 16% in the said period. This shows significant credit growth vis-a-vis deposit growth. In fact, it was in the third quarter of the current fiscal that the difference between deposit and credit growth peaked, thus putting pressure on liquidity. On the bright side, strong domestic demand and government capex in the financial year has provided a big boost to GDP growth, which has been more than 8.5% till date for the fiscal. The International Monetary Fund (IMF) projects India's GDP growth for FY11 at 8.8%, while the government has projected it at 8.6%. However, firmer crude oil prices and sectoral imbalances, particularly the supply-demand mismatch for non-cereal food items, has led to a consistently high inflation rate. Steps taken by the Reserve Rank of India (RBI) to maintain a balance between growth and inflation have produced muted results indicating that monetary measures to control inflation have their limitations.
Some of the key steps taken since the last budget impacting the banking sector are as follows:
1.) Statutory liquidity ratio (SLR) reduced to 24% from 25%.
2.) Repo rate increased by 175 bps (100 basis points is 1%), from 4.75% to 6.5% and reverse repo rate by 225 bps, from 3.25% to 5.5%. Also, cash reserve ratio (CRR) also increased by 50 bps from 5.5% to 6%.
3.) Base rate for banks introduced for lending purposes.
In view of the above-mentioned facts, some fiscal measures to help banks participate more substantially in infra-related sectors and continue their support to retail mortgages would be welcome. Also, giving infrastructure status to townships, providing tax breaks for housing development will act as growth catalysts. Further, extending tax holiday benefits for export-oriented units by another three years will be well received. Besides, tax-free status for fixed deposits up to three years and more would also be a welcome move. This will help banks manage their asset liability management (ALM) mismatches better. In addition, enhancing the tax exemption limit to Rs 2,00,000 in line with the proposed Direct Tax Code Bill (DTC) from April 2012,would provide immediate relief to the salaried class going by the present inflationary scenario. – www.financialexpress.com
Posted By Rajkumar to ITR at 2/01/2012 11:14:00 AM