Investment limit of PPF, Senior Citizens Savings Scheme may increase in Budget

The Union Budget needs to encompass behavioural changes of digitization and increased financial savings of households, according to State Bank of India’s research report Ecowrap.

Referring to the significant behavioural changes across the world since the outbreak of the pandemic, the report observed that a logical corollary of such changes is that the country must take steps to inculcate such habits on a permanent basis.

To this end, the budget may just be the ideal opportunity to incentivise digital transactions, the report said. ¨

 Merchant payments

In this regard, Ecowrap suggested a variety of incentives including the Government prohibiting levy of any convenience fee and other charges on use of any digital mode for making payment to a merchant; and enabling credit cards as a payment option on UPI (Unified Payment Interface) platform for customers making payment to merchants (Peer to Merchant).

Further, it also recommended expediting the Gazette Notification to allow Aadhaar-based biometric authentication to non-bank entities. ¨

“Separately, to fulfil the Prime Minister’s vision of Atmanirbhar Bharat, why not make RuPay as a default card option for all the banks (including Public and Private Banks) operating in India?” the report, put together by SBI’s Economic Research Department (ERD), said.

Given that the per capita credit card and debit card transactions has jumped by up to 1.4 times compared to pre-covid levels, all Utilities/Municipal Corporations/Urban Local Bodies must also compulsorily offer digital payment options to citizens to make payments, especially in Tier-2 and Tier-3 Cities and further incentivise them, said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

This has been already implemented by oil marketing companies at fuel stations, he added.

Budget could levy two new cesses

Tax related suggestions

To incentivize jump in household financial savings, Ecowrap suggested increase in the investment limit of Public Provident Fund (PPF) Account, Sukanya Samriddhi Account, and Senior Citizens Savings Scheme (SCSS).

The report recommended increase in the investment limit of PPF Account and Sukanya Samriddhi Account from the existing ₹1.50 lakh per annum to ₹3 lakh per annum. For the latter, the tenure of the account may be increased from the current 21 years to 25 years since several girls are going in for higher studies before marriage.

SBI’s ERD said the ceiling of investment in SCSS should be considered for upward revision to Rs 30 lakh from Rs 15 lakh as retirement benefits have gone up manifold.

Moreover, there can be a provision for extending the scheme twice for a three-year block instead of once as is presently the case.

Bonds

The report says that Banks and Institutions should be allowed to raise tax free infrastructure bonds (preferred tenor 15-20 years) and the exclusive purpose of such resources should be for Infrastructure project finance.

It also recommended that infrastructure financing companies should be allowed to issue tax paid bonds to tap funding from retail investors, wherein the tax on interest income of such bonds will be paid by the Bond issuer (tax deducted at source -- 10 per cent under section 193 of the IT Act).

Such structure while being attractive to the retail investors, will also ensure that the Government. is not losing on its tax revenue, it added.

The ERD also suggested that the Government can consider issuing Infrastructure Bonds against the dues of the Government infrastructure financing companies (PFC, REC, IIFCL, IRFC, etc.) similar to Oil Bonds and fertilizer bonds and may be made part of statutory liquidity ratio (SLR) for banks.