
Further, the interest earned on fixed deposits or even on savings parked in savings accounts attracts income tax if it exceeds Rs.10000. Considering the reduced value of rupee due to continuous inflation, this ceiling should at least be doubled. This would also achieve the objective of routing deposits through bank channels. Banks deposit growth is dwindling that would affect the credit-deposit ratio. At present the rural rich are averse to keeping their surplus in banks due to anxiety about deduction of tax at source. Banks can attract such deposits especially when they have been going in a big way for financial inclusion in rural areas.
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