April 2, 2018
Tax officials went knocking on the doors of banks over the weekend, nudging them to fork out tax deducted from the interest on deposits, salaries and other heads well before they are required to under the law.
Banks and corporates are allowed to pay the TDS or the tax deducted at source for any month by the seventh of the next month. For March, the TDS can be paid on or before April 30.
However, tax officials — driven by stiff revenue targets and a green signal from the finance ministry — tried to persuade many private as well as state-owned banks to pay the TDS by March 31 so that the amount collected can be booked in the tax kitty for the financial year 2017-18.
In one of the large private banks, the Mumbai tax office even considered offering its technical assistance to enable the bank in computing the TDS number. Another institution was advised that if it could not calculate the exact TDS number for March 31, it could pay an amount which was close to the TDS of the previous quarter. The officials were acting on the basis of an internal note from the Central Board of Direct Taxes (CBDT), the apex body.
In a communiqué on the evening of March 28, CBDT commissioner Anand Jha told principal commissioners of large tax circles like Mumbai that the Department of Financial Services (DFS) has on the request of the board asked banks to deposit TDS of this quarter by March 31, a person aware of the development told ET. (DFS is a wing of the finance ministry).
According to this person, Jha, in the email, said: “I am directed to request you to take all measures to ensure that the due TDS is deposited by the banks assessed in your charge by 31.03.2018 and that the Budget targets are achieved now that the banks have been asked to advance the date of deposit of TDS.”
With the GST collection yet to stabilise, the income tax department has been on an overdrive this year.
Banks deduct TDS of 10% from interest earnings of more than Rs10,000 on deposit; so, a deposit of Rs 5 lakh, generating annual interest income of Rs 35,000 at 7% interest, would attract TDS of Rs 3,500. Besides salaries (on which TDS rates depend on income slabs), banks with large branch networks pay TDS of 10% on rent.
“Any such CBDT circular directing commissionerates to advance the date for submitting TDS can only be a temporary solution. It does not help the government in the long term. If the tax liability for this year has to be discharged before March 31, it would result in lower the collection next year. Corporates and banks with enough liquidity might not have had a problem in complying though the TDS work added to the usual rush and work load during a financial closing. However, as per the provisions of the Income Tax Act, if for any reason, this direction is not complied with and the payment could not be made not by end March, it would not amount to a violation of law. Moreover, the instruction was issued too late,” said senior chartered accountant Dilip Lakhani.
In the past tax officials had requested assesses to pay the TDS in advance. However, this year the department was more aggressive.
According to Lakhani, corporates which faced cash-flow problems preferred using the money to service bank loans and avoid an NPA tag to depositing it as TDS before March 31.
CBDT members, probably acting on the instruction of the finance ministry, have over regular video conferences pushed tax circles to look for areas of concealment of income and improve tax collection as much as possible. This year, thousands of individual tax payers and business entities have received notices under Section 148 of the Income Tax Act which tries to capture earnings that have escaped the tax net.
In many cases, homemakers with no taxable income have received notices because their names figured as joint account holders or investors in mutual fund schemes.
“Eventually, they would be spared by the department. But persons receiving such notices would have to go through the pain of explaining their respective cases,” said another practitioner.
[The Economic Times]