sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
Budget Extravaganza »
 How Union Budget 2018 impacts individual taxpayers
  How Budget 2018 will be different due to GST
 This is how Budget 2018 announcements may help you save tax
 Here's why the government advanced the Budget date
 Will Budget 2018 Reduce Your Income Tax? 10 Expectations
 How Budget 2018 will be different due to GST
 Will Budget 2018 cut tax on switch from dividend to growth option in mutual funds?
 Startup eco-system looks forward to the budget for addressing tax dilemma
 High time to prioritise non-tax revenue in the Budget
 Govt may abolish dividend distribution tax in budget
 Budget making in the GST era: paradigm shift

Higher tax relief on provisions for bad loans in works: Budget 11
February, 11th 2011

Concerned over rising non-performing assets in the banking sector, the budget for 2010-11 may reduce the tax on funds banks set aside to cover potential losses from loans that aren't likely to be repaid.

At present, only 7.5% of the amount banks set aside for covering bad and doubtful debts is allowed as deduction from income while calculating the tax liability.

"The deduction amount could be increased to 50%, though banks have demanded a full waiver," a senior finance ministry official told ET.

The ratio of gross non-performing assets, or NPAs, to gross advances for commercial banks rose to 2.39% in 2009-10 from 2.25 % in 2008-09 and is likely to climb further in the current fiscal.

In absolute terms, the total NPAs of scheduled commercial banks stood at 74,685 crore at the end of March 2010.

Banks are worried that if the concession is not provided then their profits could take a hit as the banking regulator, the Reserve Bank of India, has increased the provisioning requirement.

The guidelines require banks to achieve a provision coverage ratio of 70% by September 30, 2010, seeking to build a cushion in good times to absorb higher losses when things turn bad. That is, provisions made against NPAs should be at least 70% of the gross amount of such advances. For instance, if a bank has 100 worth of NPAs, it would have to provide at least 70 against such profits.

The higher provisioning will clearly reduce bank profits if the deduction stays at 7.5%. A higher deduction, on the other hand, will reduce the tax liability, encouraging banks to go beyond the stipulated 70% minimum provisioning when profits are good.

Under the earlier rules, the provisioning requirements for NPAs ranged between 10% and 100% of the outstanding amount, depending on the age of the NPAs and the collateral available.

The banks have argued that while they are being asked to allocate more amount towards provisioning, the tax rebate offered is dismal.

"The rebate will help to retain profits and thus increase lending, which is what the government wants," a State Bank of India official said.

SBI, the country's largest lender, had a provision coverage ratio of 64% at the end of December 2010. Analyst peg the incremental provisioning required for reaching the 70% target is about 2,000 crore.

In their pre budget consultations with finance minister Pranab Mukherjee , banks had also demanded that their non-interest income should not be subjected to tax deduction at source, or TDS.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
System Testing Solution Manual Software Testing Solutions Automation Software Testing Solutions System Workflow Testing System Manual Testing

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions