IT dept to share wealth tax returns data of defaulters with banks
June, 03rd 2014
Recovering money from wilful defaulters could get easier for banks. The Central Board of Direct Taxes (CBDT) has told all chief income tax commissioners to provide public sector banks with information about assets listed in the wealth tax returns of such defaulters.
The communication (No. F. 328/10/2014-WT), a copy of which is with HT, was issued on Wednesday. A wilful defaulter is defined as someone who defaults on a loan despite having the capacity to repay it. So far, the I-T department had not been sharing this information as it was considered privileged.
It is fairly common for wilful defaulters to mortgage overvalued property. “Often, mortgaged machinery is old and defunct, having little resale value. But they are shown as new and, therefore, saleable in our books. These defaulters also own several valuable assets that the lending bank doesn’t know about.
The new circular will allow us to go after such assets,” said a senior executive at a public sector bank.
Since banks can’t legally attach properties that haven’t been mortgaged, the information in wealth tax returns will allow banks to approach the Debt Recovery Tribunal (DRT) and courts for orders to sell these assets and recover loans that are in default.
“A transparent protocol and legislative framework need to be put in place to provide confidential information in public interest under compelling circumstances,” said Rahul Garg, leader, direct tax, PwC India.
Public sector banks are stuck with non-performing assets worth Rs. 1.64 lakh crore, a more than four-fold rise over the NPA figure of Rs. 39,000 crore in 2008.