Ahead of Budget 2025, the SBI research report has suggested a slew of measures to push tax reforms, including bringing all under the New Tax Regime. In its report, ‘Prelude to Union Budget 2025-26’, SBI said the government can ensure better tax compliance and bolster consumption by enhancing disposable income by moving all and one under the New Tax regime.
This, the report said, can be done at a nominal loss by foregoing a certain amount of tax collection.
The FY 2025-26 Budget could be “built on the edifice of: social security, financial stability, healthcare, and consumption. We envisage the Pareto optimal solution of rationalizing direct taxes across various options with least revenue loss… .” The loss is estimated at Rs 50,000 crore, a meager 0.14% of GDP, as per the report, adding maximum gains to consumers on account of removing all exemptions under the Old Tax Regime and bringing all taxpayers under the New Tax Regime.
The research report, however, suggesting retaining and enhancing the NPS limit from Rs 50,000 to Rs 1 lakh. It also favoured hiking medical insurance exemption to Rs 50,000 from Rs 25,000.
The SBI research report has suggested rationalising tax rates at 15% instead of 20% for those earning Rs 10–15 lakh annually.
Also read: Budget 2025: Govt may replace Income Tax Act, 1961 with THIS new law! What it means for taxpayers
SBI proposes a 15% flat tax on deposits across all maturities
In its pre-budget report, the SBI report has suggested implementing a flat 15% tax rate on interest earned from FDs across all maturities, which would replace the current slab-based tax system.
The proposal aims to align the taxation of FD interest with the tax treatment of equities and reduce the complexity of the existing structure. However, it comes with a significant revenue loss estimated at Rs 10,408 crore for the government.
Currently, interest from fixed deposits is taxed at individual income slab rates, ranging from 5% to 30%.
SBI’s proposal calls for a uniform 15% tax on FD interest, applicable at the time of withdrawal, rather than being taxed annually on an accrual basis. This would bring FD taxation in line with the tax treatment of other financial assets,
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