The Hindu Business Line : CBDT specifies reporting format for banks

The Finance Ministry has made it easier for banks to comply with the Budget 2005-06 provision that required them to report to the revenue department all deposits on which interest has been paid without deduction of tax at source.

The burden of compliance has been reduced, with the Central Board of Direct Taxes (CBDT) now mandating banks to provide a "consolidated return for all branches" (bank level return) to the revenue department rather than transaction-wise details of time deposits on which interest has been paid without tax deducted at source (TDS).

As per the new arrangement, the details of the transactions would be held at the branch level and only the overall picture on time deposits would be passed on to the revenue department (through the consolidated return). The Finance Ministry has spelt out the format of the quarterly return (Form 26QAA) that banks would have to furnish to the tax department.

It has also spelt out the format in which every branch, of a banking company that is required to submit the quarterly return, should maintain particulars of time deposits on which interest has been paid without TDS. The CBDT has also stipulated that the quarterly returns are to be furnished to the Director General of Income Tax (Investigation).

Quarterly schedule

The returns are to be filed on or before July 31, October 31, January 31 and June 30 following the respective quarters of the financial year.

Banks have been expressing their inability to comply with the Budget requirement in this regard 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.

No deduction

At present, the I-T Act specifies that a bank would not be required to deduct tax at source on interest on deposits where the amount 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.

Top bankers had pointed out to the tax authorities that the problem of reporting such detailed transactions was compounded in cases where the branches are not hooked on to the core banking solution.

More Stories on : Income Tax | Fixed Deposits

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