Now Reading: Equirus calls for abolishing advance tax, trimming small savings
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Equirus calls for abolishing advance tax, trimming small savings
Domestic brokerage Equirus has proposed scrapping the advance tax system and gradually tapering small-savings schemes to free up capital for productive use. In a report titled ‘India’s path to a $20 trillion…
The Story in Brief
Domestic brokerage Equirus has proposed scrapping the advance tax system and gradually tapering small-savings schemes to free up capital for productive use. In a report titled ‘India’s path to a $20 trillion economy’ released on Thursday, Equirus said abolishing advance tax could release about Rs 10 lakh crore in working capital while reducing compliance burdens. The system forces businesses to prepay taxes on income not yet earned, and penalises them if a weak quarter leads to revision.
The report also flagged that administered rates on small-savings instruments like PPF (7 per cent) and Senior Citizens’ Savings Scheme (8 per cent) remain high even when market yields fall, distorting pricing. With the small-savings pool at roughly Rs 24 lakh crore and growing 14-16 per cent a year, Equirus suggested channelling even a fifth of that into market-priced bonds would move the needle. Advance tax accounts for about 38 per cent of gross direct tax collections, the report said.
The Indian Opinion
Equirus’s proposals sound tidy on paper but ignore real-world political economy. Abolishing advance tax would ease business cash flow, yet it also removes a steady quarterly revenue stream the government relies on to meet its fiscal targets. Similarly, tapering small-savings schemes risks alienating millions of risk-averse depositors, especially in rural areas, who depend on assured returns. The report’s neat arithmetic assumes flawless market absorption. A tougher test: will the next budget dare to tinker with small savings when they remain a political safety net?
Source: thehindubusinessline.com
This story was synthesised by AI from the source linked above.
