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PRESS TRUST OF INDIA
MUMBAI, March 3: Deposit collection of banks is likely to be affected by the tax incentives provided to mutual funds in the Union Budget 1999-2000, ICICI Securities (I-Sec) has said.
``With all open-ended equity funds and US-64 exempt from dividend tax and lowering of tax to 10 per cent for other open ended funds would adversly affect the banks,'' I-Sec said in its fortnightly money market update. It said deposits would suffer as savings shift towards mutual funds to take advantage of the tax breaks. ``The new proposal makes it attractive to route all investments through mutual funds as the tax differential between direct investments in bank deposits and investments routed through mutual funds would be 28.5 to 38.5 per cent,'' I-Sec said.
Banks themselves cannot invest in mutual funds beyond five per cent of the incremental deposits collected the previous year, limiting them from routing their investments to gain tax advantage, it stated. On the fiscal deficit, I-Sec said, deficit of the centralgovernment for 1999-2000 has been budgeted at Rs 79,955 crore. However, based on the earlier methodology fiscal deficit would be Rs 1,04,955 crore.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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