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Social Deposits – An Idea for Poverty Free India by 2020


Please read my earlier blog ‘A Bank to Thank’ to know more about social deposit or micro-credit

I am no tax expert nor am I a financial guru. It seems to come up with ideas to rid India of poverty you needn’t be one. Here is one such idea
‘Include social deposit(or micro-credit) with a limit of INR 50,000 in section 80C of income tax. Thereby extending the 80C limit to INR 170,000.’
With this we will reduce the poverty of India in 6 years time.

If Narendra Modi’s government implements this, he can for sure claim in his 2019 report card that he stood upto ‘सबका साथ सबका विकास’ which in my knowledge means ‘Together we prosper’.

Now your left analytical brain would ask how? Let me elaborate
Tax payers:
  • India has a growing population of 1.24 billion of which 150 million people are below International Poverty line.
  • Out of the 1.24 billion, there are about 34 million tax payers in India.
  • Of these 34 million tax payers, only about 15 million are salaried and hence tax for them is deducted at source.
  • Income Tax reports the total tax paid by salaried class as 1121 billion Rupees.
  • That’s an average of 75K paid per person.

Here is a graph to illustrate these stats

Now lets consider the scenario if Government were to add a new category of saving called social deposit through RangDe (or other reputed social lending organizations) with an upper cap of INR 50,000.
Let’s assume that atmost 33% of the salaried tax payer’s (15 million) use this component fully to save on tax.
Therefore 33% of 15 million, i.e., around 5 million invest around 50K each.
This would result in 250 billion Rupees (or 25000 crore) in social deposits.

Now say the average social loan size that could be given is INR 10,000, you will have helped 25 million (or 2.5 crore) small street business or village women entrepreneurs in getting loans at low rates which will in turn help their business and help themselves to financially sustain and then payback the loan.
Now if you do that every year, you will have touched about 150 million (25 mi *6 years) people in 6 years time. And that too, if the lock in period of these social deposits in only 1 year.
If we have the lock in period at 3 years (like a tax saving mutual fund lock in period) we will reach the target of improving 150 million people’s lives in half the time ( i.e, 3 years)

Simple isn’t it?
Poverty free India by 2020 is achievable

P.S: I am assuming that the reputed social lending organizations aren’t Government based organizations, nor are they Banks. If it’s these then the social deposit scheme is no different from rest of the 80C instruments