Sarbajeet K. Sen
New Delhi, Jan. 22
THE Central Board of Direct Taxes (CBDT) is considering doing away with the requirement to report to the Revenue Department all deposits on which interest has been paid without deduction of tax at source. This move would come as a major relief for banks.
Instead of transaction-wise details, the CBDT might mandate banks to report the information on such deposits in a more concise manner to provide the broader picture to the tax department. Under the proposed system, the details of such transactions would continue to be held at the branch level.
"We are looking at moving to a management information system (MIS) like reporting where there would be no need for give transaction-wise reporting but only the overall picture is passed on to the tax department," a senior CBDT official told
As an anti-tax evasion measure, the Finance Minister, Mr P. Chidambaram, in his budget speech of 2005-06 had asked banks to report to the tax department all deposits that are exempt from TDS on interest.
However, with banks expressing their inability to comply with the requirement in full due to the mammoth back-office efforts required to collate such data, the CBDT has had to give repeated extension to the deadline for filing the quarterly returns.
At present, the I-T Act specifies that a bank would not be required to deduct TDS on interest on deposits where the interest paid in a financial year does not exceed Rs 5,000. For such transactions, the Finance Act, 2005, mandated banks to file quarterly returns for the period ending June 30, September 30, December 31 and March 31, in each financial year.
However, till date banks have been unable to comply the deadline for the return for the first quarter that expired on July 31. The CBDT, after giving two earlier extensions, has again recently extended the deadline to January 31.
Top bankers have pointed out to the tax authorities that the problem of reporting such detailed transactions is compounded in cases where the branches are not hooked on to the centralised banking solution (CBS). "Large banks have many branches that are yet to be fully computerised. Collating data in such branches is a mammoth task that we are unable to handle. We have a client base running into crores and the magnitude of the task is immense," a top official of a large PSU bank said.
Moreover, the absence of any directive from CBDT on a standardised format of reporting has also come in the way of getting the data transmitted to the higher offices of the banks from the branches, bankers said.