New Delhi: The Central government is considering the demands of several banks that fixed deposits for three years be made tax-free providing a level playing field with mutual funds and tax-free bonds.
According to some media reports, during the pre-budget meeting between Finance Minister Arun Jaitley and bankers, it was proposed that fixed deposits maturing for short durations be given tax rebate.
Bank executives and heads of financial institutions suggested that small lock-in schemes will invite more deposits.
If the proposed suggestions are adopted and announced by the government, experts say, people will prefer choosing the FDs having three-years lock-in periods instead of going for mutual funds.
Suresh Sadagopan, founder of Ladder 7 Financial Advisories told ET that lower lock-in will bring flexibility as this will bring bank fixed deposits in direct competition with equity linked savings schemes (ELSS).
At present, investment up to Rs 1.5 lakh in certain instruments including various post office schemes, public provident fund, bank deposit, life insurance and principal paid on housing loan are eligible for tax rebate.