Chidambaram may discuss tax issues with PSB chiefs
February, 12th 2008
The Finance Minister, Mr P Chidambaram, is likely to discuss with the chief executives of public sector banks on Tuesday the slew of tax-related proposals suggested for budget 2008-09 by the Indian Banks Association (IBA).
Banking industry sources said that public sector banks have urged the government to exempt them from tax deduction at source (TDS) on their income, stating that TDS requirement causes considerable inconvenience in view of huge volumes of TDS certificates collected from thousands of borrowers/customers.
Moreover, it leads to loss of tax benefit as on non-receipt of TDS certificates from borrowers/customers, income tax department does not grant credit for TDS, which leads to unnecessary tax liability, say bankers.
Among the IBA recommendations, the provision on bad and doubtful debts under the income tax law is likely to come for special discussion. IBA wants the present provision for bad and doubtful debts (available under section 36(1)(vii a)) be replaced by an allowance based on actual provisioning made as per the RBI guidelines.
Sources said that IBA has pointed out that there is a considerable divergence between provision made under RBI guidelines and that admissible under the income tax law.
IBA has suggested that income tax law be amended to allow mandatory provision made by a bank or a financial institution as per RBI guidelines, as a deduction and to tax any write back of such provision.
At his meeting with PSB Chief Executives, the Finance Minister is also likely to discuss the implementation status of the Scheme for extending financial assistance to sugar undertakings 2007.
This scheme had been framed to improve the liquidity position of the sugar undertakings and enable them to clear cane price arrears of 2006-07 and 2007-08 sugar seasons related to statutory minimum price (SMP), sources added.