TDS matter continues to be an irritant for bank customers
Moneylife Digital Team 12 September 2011

Account holders complain banks do not give TDS certificates on time, tax deducted not credited to tax credit account 

The Reserve Bank of India recently announced that banks must issue duly completed tax deduction at source (TDS) certificates for account holders and dispatch it to their mailing addresses. But, customers continue to face many problems on this account.

Many customers complain that they are not getting TDS certificates from the banks and often, such certificates do not match with the 26AS statement of the income-tax (I-T) department. Currently, the I-T department relies on TDS certificates issued by banks only if it matches with the information contained in form 26AS on the income-tax website. If there is a mismatch, the taxpayer may not get a refund of tax that's claimed.

One Moneylife reader says: "Banks issue TDS certificates on the interest earned on term deposits, but this has not been credited to the tax credit account of the depositors in most of the cases. This results in non-refund of tax claimed by the taxpayer through filing of returns with the TDS certificate issued by the deductor."

Moneylife has repeatedly pointed out that TDS has been nothing but harassment for bank customers and taxpayers.

"When the PAN (number) of an account holder is not available, tax is recovered at 20%. But when TDS is recovered at 10%, it means that the PAN of the account holder is available. The bank is duty bound to update your recovery, so that the same is visible in your AS26," another reader writes. "Usually this step is not taken care of, and a bank is bound to update this when it is brought to its notice by the account holder. However, the experience is that there is no misappropriation under TDS recovery in public sector banks."

According to a banking and financial consultant, though it is mandatory for banks to send the TDS certificates to depositors every quarter without their asking for it, barring a few banks, none of the major banks bother to send this. Another problem depositors' face is that different banks follow different systems for payment of interest and deduction of tax at source. Many banks just credit the net amount of interest after deducting tax, due to which the depositor will not know the amount of tax deducted till the TDS certificate is issued by the bank.

Another reader said that many banks deduct TDS on the accrued amount instead of the paid amount. "One of the problems in connection with TDS on bank deposits is TDS on accrued amount instead of paid amount. Kotak Mahindra Bank has been deducting TDS on the assumed accrued interest in case of sweep / Flexi fixed deposits, even when the net amount earned is below the TDS threshold. The sweep FD is generally utilised for a temporary period to earn little higher interest than on the savings account. The same amount may be withdrawn at any time based on the need. But the bank deducts TDS on the total amount calculated for the entire tenure of the deposit even though the amount may be withdrawn in full or part during the financial year. This is unjust and unfair on the part of the bank," he says.

Moneylife Foundation recently sent a memorandum on the TDS matter to the finance ministry and the Reserve Bank of India (RBI). The memorandum to the RBI highlights the TDS problem for bank depositors and suggests that income from fixed deposits should be exempt from tax. It also proposes that banks found to be deficient in services, like deducting tax wrongfully, not providing accurate tax certificates, or uploading inadequate or wrong information, should be awarded exemplary punishment, either by the banking ombudsman or the RBI. (Read, 'Moneylife Foundation sends memorandum on TDS to the FM, RBI'.)

subrahmanian s h
1 decade ago
Another example:

And this month too I have received pension of Re 1 more !(than the reduced amount of Rs 21441)
credits: 30/05 21563
credits: 28/06 21441
credits: 30/07 21441
credits: 30/08 21441
credits: 30/09 21442

Subrahmanian S.H.
Reply fro SBI:

[email protected] via
9 Oct (7 days ago)
to mani

Dear sir,

We have to advice that discrepancy in pension is due to TDS deducted at source as per govt income tax instruction.

Sir, you have to update KYC of SB pension a/c 10843825430 ,PLEASE VIST THE BRANCH WITH YOUR PAN CARD AND RESIDENTIAL PROOF


We will give you pension paymnt details when you visit the branch

service manager
SBI Mulund (west),
S H Subrahmanian
1 decade ago
Improvement in banking service is need of hour. Banks have increased service charges to extreme levels but have never bothered to improve standard of service towards customer.
Often the emails sent by me are mostly not replied by Banks.
It’s the onus of banks and income tax dept. to ensure the correctness and correlations. Whatever other parameters it sets the onus of matching TDS to tax paid/mismatch to the computer systems! Income tax's post-return of extra tax is stupid exercise wasting time, making it hell to customers due to negligence by banks/others
Now RBI has warned the Banks to be more responsible to the customers. I was told that the TDS certificates have already been sent long back which I never received for any of the eight accounts. How can all the certificates go missing? The probability is that they were never sent. When asked for the proof of delivery, it came to be known they had been sent by ordinary post!
Not that kind-Hearted have vanished altogether. We have had pleasant experiences too. While closing many SCQIS at SBI, Mulund, Mumbai a few months back, documents were not found properly filed. There was a big crowd. Though we (Sr Ctzns) had to remain in the branch for the entire day, the kind officer(s) a few months ago attended to me, asking me to dig out relevant papers. But for that I would have to face heavy problems/ possibly losses! It was all the more important that I could reinvest the produce in FDs with more than 10% interest – a plan that was pending for long.!
I would happy as and when RBI makes it mandatory in banks having the “Nomination details” part of KYC.
S H Subrahmanian
1 decade ago
My personal experience:
The 'ill famous SS Saving Scheme: Bonus vanished and interest reduced by the same Chidu, who introduced the scheme. Also, tax became a fact, though introduced as tax free. And, for instance, I found, when continuing a Certificate for Rs 50,000 last year, the principal becomes only
Rs 46,000. The reason: A Tax Deduction of "The difference 4,000" for the year 2009. And no TDS was issued to me ever....! This is despite my submitting 15H regularly.
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