Deficit-prone government asks banks to remit TDS by March-end
19 March 2014
In a desperate bid to shore up the government's sagging finances before the year-end, the finance ministry has advised banks to remit the tax deducted at source (TDS) on salary, rent and credit of interest on deposits to government account by end-March, one month ahead of the 30 April due date.
The finance ministry move also undermines Income Tax Rules that allow banks time up to 30 April to deposit TDS when the income or amount liable for TDS is credited or paid during the month of March.
Finance minister P Chidambaram is pulling all stops in his desperate bid to ensure that the fiscal deficit for the current fiscal does not cross the 4.8 per cent ''red line'' he himself has drawn.
Chidambaram had said the government's deficit for the current financial year would not exceed 4.8 per cent of GDP.
The finance minister had, in October last year, also requested public sector bank chiefs to ensure that dividend payable to the government for the 2013-14 financial year is not less than the Rs6,803 crore paid in 2012-13.
Despite ballooning bad and non-performing loans of state-run banks, the central government has benefited from the handsome dividends declared by major lenders, including State Bank of India, Bank of Baroda, Bank of India and Punjab National Bank after their third-quarter results.
While the finance ministry's advisory is not in accordance with Income Tax Rules, bankers point out that an early remittance of TDS will deny banks the benefit of the thousands of crores of rupees of float money that is otherwise offer handsome returns to them before remitting to the Government.
Also, since the aim of TDS is collection of revenue at the very source of income, and the rates and time od deduction vary, the actual amount deducted from payments of various kinds such as salary, interest, contract payment, commission, etc could vary.
The secretary to the department of financial services had, in late February, requested the Indian Banks' Association (IBA) to issue directions to all its member banks to ensure that apart from remitting TDS on salary and rent within the current financial year, they should also remit TDS on credit of interest to the government account in March itself, 'in accordance with the law,' and 'Not in line with tax rules.'