Budget 2025 expectation: Increase savings account tax exemption to ₹20,000, says SBI Research

Union Budget 2025-26 expectations: Ahead of Finance Minister Nirmala Sitharaman's Budget 2025 speech on February 1, 2025, SBI Research has proposed to double the savings account tax exemption limit to ₹20,000.

A taxpayer is exempted from paying tax on interest income of up to ₹10,000 from all his/her savings bank accounts under Section 80TTA of the Income-tax Act, 1961.

As per the report, doubling the savings account tax exemption limit may result in a revenue loss of around ₹1,531 crore. But it will also lead to the following benefits.

"Stability in core deposit base, financial stability, better visibility of system liquidity against growing digital payments and most important allowing banks to pass on the benefits accruing through low-cost deposits to fund the humongous social commitments (FI 2.0) / sunrise sectors led demand in continuum," the report said.

Savings accounts typically offer up to 4% interest. Increasing the tax exemption limit may lead to more money in their savings account.

The report further said, "there should be impetus for the average depositors to continue the pattern of demand and time deposits allocation, helping banks to pass on the benefits of low-cost deposits to meet commitment towards social attributes/sunrise sectors led demand in continuum."

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