Financial inclusion is a national priority for the government, whose commitment to inclusive growth is commendable.
The Prime Minister’s Jan Dhan Yojana initiative and MUDRA are shining examples of the government’s execution edge. Seventy per cent of the 20.5 crore Jan Dhan accounts opened are operational and the average balance is ?1, 505 per account. The Pradhan Mantri Mudra Yojana is a game changer.
In this context, we urge Finance Minister Arun Jaitley to favourably consider the following in his forthcoming Budget.
Economically weaker section (EWS) versus middle class: Middle-income group gets tax concessions on insurance premium paid and also on interest paid on housing loans.
The law does not preclude the EWS from getting these concessions because they are below the tax bracket or not equipped to file a return. Then service tax on financial services extended to them becomes a poverty premium.
We would request the FM to consider waiving the service tax on any fee payable on all micro loans (less than ?50,000) extended by NBFC-MFIs and on micro insurance (sum insured of less than ?50,000) premium paid. A waiver of service tax on Rupay card will be helpful.
The revenue loss on this account will be minimal but service tax, being an indirect tax, is collected from 3.42 crore beneficiaries through NBFC-MFIs. The waiver adds to the operational efficiency.
A blanket waiver of stamp duty on all deeds of hypothecation and assignment deeds executed by NBFC-MFIs will reduce the transaction cost.
The provision for bad and doubtful assets made by banks and FIs are allowed as a tax deduction. But not NBFC-MFIs who are also subjected to prudential norms like capital adequacy, provisioning, mark to market, ALM (asset liability management) and so on.
Therefore, NBFC-MFIs should be allowed to treat provisioning made on credit assets as a tax deductible expenditure.
The amendment in Section 36 (1) (Vii a) of the Income-Tax Act should be cross referenced to all applicable sections including Sec 115 JB.
All that the industry is seeking is a level playing field and who else can we turn to except the Finance Minister.