The old tax regime provides for a similar deduction and no tax on income up to Rs 5 lakh
The income tax concessions proposed in the Union budget will promote more savings and propel growth in deposits, which in turn, will help the banking industry, Bandhan Bank Managing Director and Chief Executive Officer Chandra Shekhar Ghosh said on Wednesday.
In her budget speech, Union Finance Minister Nirmala Sitharaman announced no tax for those with an annual income of up to Rs 7 lakh under the new tax regime but made no changes for those who continue in the old regime that provides for tax exemptions and deductions on investments and expenses such as HRA.
"For the last year, we have witnessed that the deposit growth is less than normal. The new tax norms proposed in the budget will encourage people to save more, and in turn, it will normalise the growth in deposits. It indeed will help the banking industry. When the deposit growth increases, the credit flow also increases," he said.
In what is being seen as a push for the salaried class taxpayer to switch to the new tax regime where no exemptions on investments are provided, the finance minister in her budget for 2023-24 allowed a standard deduction of Rs 50,000 under the new regime.
The old tax regime provides for a similar deduction and no tax on income up to Rs 5 lakh.
Also, the basic exemption limit has been raised to Rs 3 lakh from Rs 2.5 lakh. A Rs 2.5 lakh basic exemption limit is prescribed in the old tax regime.
Speaking on the budget proposal for simplifying the KYC process, Ghosh hailed it as “a noble effort”.
"The simplification of the KYC process will help bank customers who often complain about complications in the KYC process. The budget also mentioned that PAN cards would be used in all files. It is also a very good decision," he said.
The KYC process will be simplified by adopting a ‘risk-based’ instead of a ‘one size fits all’ approach, the FM said.
She also said the financial sector regulators will also be encouraged to have a KYC system fully amenable to meet the needs of Digital India.
Ghosh also said the government's proposal for the micro, small and medium enterprises (MSMEs) was “very important” as the country's future growth prospect lies in the sector.
"In our country, the economic growth will come from the MSME sector as it contributes to the per capita income and generates employment.
“The credit guarantee scheme helps the bank take risks in lending in this sector," he said.
Last year, the FM proposed revamping of a credit guarantee scheme for MSMEs.
“I am happy to announce that the revamped scheme will take effect from April 1, 2023 through infusion of Rs 9,000 crore in the corpus. This will enable additional collateral-free guaranteed credit of Rs 2 lakh crore. Further, the cost of the credit will be reduced by about 1 per cent,” she said.
Kolkata-based microfinance institution VFS Capital MD and CEO Kuldip Maity said the Union budget has “a greater emphasis on the rural sector, social sector schemes and infrastructure creation”.
“We also welcome the measures announced for the MSME sector. Rs 9,000 crore corpus for revamped credit guarantee scheme is expected to address the liquidity stress of micro enterprises and will push the next level of growth for the MSME sector in the country,” he added.