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Scheduled commercial banks can access information about individual assesses from the Income Tax Department, the Central Board of Direct Taxes (CBDT) has said.
Experts feel such information sharing will help banks deduct tax precisely and also verify information on assessees. Scheduled commercial banks include State Bank of India, Punjab National Bank, Bank of Baroda, HDFC Bank and ICICI Bank, among others.
“In pursuance of sub-clause (ii) of clause (a) of sub-section (1) of Section 138 of the Income-tax Act, 1961, the Central Government hereby specifies ‘Scheduled Commercial Banks’ listed in the Second Schedule of the Reserve Bank of India Act, 1934, for the purposes of the said clause,” CBDT said in a notification dated August 31.
Section 138 of the Income Tax Act prescribes the mechanism for disclosure of information while respecting assessees. Based on the provision of this section, the Tax Department may furnish information to “such officer, authority or body performing functions under any other law as the Central Government may, if in its opinion it is necessary, do so in public interest,” said the notification. These officers, authority or body need to be notified in the Official Gazette, it added.
Sandeep Jhunjhunwala, Partner at Nangia Andersen LLP, said the addition of ‘Scheduled Commercial Banks’ by the CBDT in the list of officers or bodies with which Income-Tax authorities can share information or details received from the taxpayers should ease a lot of administrative hassles currently faced by the banking industry.
TDS operations
It would help them in taking decisions on TDS deductibility on various payments, such as TDS under Section 194N, which requires multiple income-tax related information and declaration from customers making withdrawals.
“The sharing of information by the Tax Department would also enable banks to validate Form 15G/ 15H submitted by the customers, matching the details with tax returns of earlier years,” he said. Forms 15G and 15H are self-declaration forms that state that one's income is below the taxable limit and hence exempt from tax. One can avoid the TDS on incomes like interest by submitting such a form with the bank.
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