Union Budget 2025-26: Financial sector seeks tax sops on fixed deposit, refinance window for EVs

Union finance minister Nirmala Sitharaman on Thursday chaired the seventh pre-Budget consultation with stakeholders from the financial sector and capital markets ahead of the presentation of the Union Budget 2025-26.

During the discussions, banks and financial sector representatives advocated for tax incentives on fixed deposits to boost savings, which have declined in recent years.

Edelweiss Mutual Fund MD and CEO Radhika Gupta said proposals to improve the efficiency of capital markets and promote greater inclusion were also raised.

Recommendations regarding incentivisation towards long-term saving, both debt and equity, were also made, she told reporters.

The meeting was attended by finance secretary, secretary of the Department of Investment and Public Asset Management (DIPAM), secretaries of the Departments of Economic Affairs and Financial Services, and the chief economic adviser.

The non-banking financial company (NBFC) sector made a strong case for a refinance window for green finance and electric vehicles.

“A specific fund, meant for MSMEs, for small borrowers, and for environment-friendly assets like electric vehicles, can be provided to organizations like SIDBI and NABARD for refinancing, just like national housing banks, which refinance housing finance companies,” said Raman Aggarwal, Director of Finance Industry Development Council (FIDC).

Aggarwal also suggested lowering the threshold under the SARFAESI Act from the current ₹20 lakh to benefit smaller NBFCs and called for the removal of TDS on non-individual borrowers, citing negligible revenue gains from this provision.

Representatives from banks suggested aligning long- term capital gain tax with fixed deposits so that deposit mobilisation can be encouraged, reported PTI quoting people familiar with the matter.

The consultations began with economists, who provided inputs amid concerns over the country's seven-quarter low GDP growth of 5.4% in Q2 FY24. Subsequent meetings involved farmer associations, agricultural economists, MSME representatives, and experts from trade and export sectors.

On December 20, Sitharaman chaired a meeting with state and UT representatives in Jaisalmer, Rajasthan, discussing state-specific needs.

The Union Budget 2025-26 is scheduled to be presented in Parliament on February 1.