BANKS SEEK BETTER TAX BREAKS ON NPA PROVISIONING

Banks have sought enhanced tax breaks for the provisions that they make in their books of accounts towards bad and doubtful debts.

At a pre-budget meeting with the Union Finance Minister, Mr Pranab Mukherjee, the country's top bankers sought full deduction for income-tax purposes the provisions made by banks on bad and doubtful debts.

Currently, the income-tax law has capped the amount that banks can avail themselves of as deduction for bad and doubtful debts. Provision for bad and doubtful debts made by banks are allowed as a deduction to the extent of 7.5 per cent of gross total income and 10 per cent of aggregate average rural advances made by them.

Alternatively, such banks have been given an option to claim a deduction in respect of any provision made for assets classified by the RBI as doubtful assets or loss assets to the extent of 10 per cent of such assets.

NBFCs bad debts

While banks sought full tax deduction on their provisions for NPAs, the Finance Industry Development Council (FIDC) pointed out that non-banking finance companies (NBFCs) do not get any tax deduction on the provisions made by them for bad and doubtful debts.

“Our plea to the Finance Minister was that asset financing NBFCs registered with RBI should be allowed to avail themselves of deduction for their NPA provisioning,” Mr Raman Aggarwal, Co-Chairman of FIDC told Business Line after the meeting.

TDS exemption

Meanwhile, bankers have also demanded that banks be exempt them from tax deduction at source (TDS) on all sources of incomes received by them. Currently, interest income received by banks from their borrowers alone is TDS exempt.

Now banks have said that their incomes from sale of financial products such as mutual funds and insurance should also not be subjected to tax deduction at source (TDS), sources said.

SOURCE: http://www.thehindubusinessline.com/todays-paper/tp-economy/article1100742.ece