Banks Want Housing Sops To Stay

New Delhi, January 28: | Updated: Jan 29 2003, 05:30am hrs
The banking sector has urged the government not to adopt the Kelkar committee recommendation for capping interest deduction on housing loans. Indeed, at a meeting with banking secretary Vineeta Rai last week, the Indian Banks Association (IBA) has advocated the need for more tax-free bonds as also interest subsidy for rural housing.

Arguing that richer sections of society were being subsidised to purchase their own dwellings, the task force had initially recommended elimination of this tax benefit which should be directed to low-income households alone. On heavy demand that this recommendation be dropped, it finally suggested an interest subsidy of 2 per cent for housing loans up to Rs 5 lakh to all borrowers. Till its acceptance, the Kelkar report has recommended that interest deduction of up to Rs 50,000 be continued.

Banking sources said the association also made a pitch for restoring the limit of TDS on bank deposits from Rs 5,000 to Rs 10,000. It also sought an increase in the ceiling of Rs 20,000 in cash for repayment of bank loans, asserting that a borrower should not be inhibited simply because he wished to return his dues in cash.

Among other demands, banks demanded that in the case of mergers and acquisitions under section 72A of the Income tax Act, they be granted exemption from income tax for unabsorbed depreciation and carryforward losses.

They also sought SLR treatment on bonds of other state and Central government corporations and undertakings on the lines of Central and state government bonds.

It is understood that the National Bank for Agricultural and Rural Development as well as the Small Industries Development Bank reiterated their demand to be allowed to float tax-free bonds.