Tax treat: Deposits may get Rs 42,000-45,000 crore boost

NEW DELHI: The tax relief measures unveiled in the 2025-26 Budget are likely to increase deposit inflow in banks and several scenarios worked out by the department of financial services (DFS) estimated it to be in the range of Rs 42,000-45,000 crore, a top official said on Monday.

M Nagaraju, secretary DFS, told reporters that the steps announced in the Budget are expected to improve the banking sector's liquidity. The assumption is that senior citizens and others, who will benefit from the Budget measures, will put some of their funds in bank fixed deposits.

The Budget announced a raft of measures and increased the income tax exemption limit to Rs 12 lakh. TDS threshold for fixed deposits interest income earned by senior citizens will go up from Rs 50,000 to Rs 1 lakh from FY26 and the Budget has also proposed an increase in tax deduction at source (TDS) threshold on interest earned from fixed deposits for non-senior citizens from Rs 40,000 to Rs 50,000 per financial year.

"Additional deposits will increase the banking systems' liquidity, reducing dependency on high cost borrowing," said Nagaraju in his presentation.

He also said the finance ministry will send a draft bill, which would seek to raise the FDI limit in the insurance sector to 100% from the current 74% for Cabinet approval.

"The finance minister has already given her approval and announced it in the Budget. Now, we will prepare a draft bill with the help of the law ministry," Nagaraju said, adding that it is most likely that it would be introduced in the Budget session of Parliament.