Public sector banks on Tuesday asked Finance Minister P Chidambaram to exempt from income tax, the interest earned from investments in infrastructure bonds covering sectors like power and roads. 

They also wanted banks to be exempted from fringe benefit tax on their contribution to pension and other funds, besides seeking simplification of rules regarding tax deduction at source on deposits.

These demands were raised by the chief executives of public sector banks in their meeting with Finance Minister, who called them to seek “their suggestions on budget, and issues of credit quality, delivery and overall performance of the banks.”

Infrastructure bonds

“They have made a number of suggestions—most of these are related to income tax. Couple of them are old ones, which are repeated every year, but there are suggestions which are worthy of consideration... I told them I will examine those suggestions,” Mr Chidambaram told reporters after the meeting. Later, Punjab National Bank Chairman & Managing Director K C Chakrabarty said, “We have asked the Finance Minister to exempt (from income tax) interest income on investments in infrastructure bonds to attract more deposits for this sector.”
Mr Chakrabathy also  said that banks have also sought exemption from FBT on their contribution to superannuation fund, gratuity of employees apart from tax exemption on investment in technology for financial inclusion and simplification of TDS rules.