Bank customers, especially fixed deposit (FD) holders often wonder why their bank has deducted tax on their FDs, even when it was not applicable or why they are unable to get tax deducted at source (TDS) certificate from the bank in time. Blame it on lethargic implementation of relevant program to do TDS compilation and remittance at branch level. What is more shocking is during September 2017, the TDS program was enabled on 6th of the month and branches were directed to finish compilation and remittance by 7th, the last date.
"The Branches were advised to ensure correctness of the TDS arrived at before remittance. There was practically no time for the branches to verify the collections and remittance (On the same day, branches were struggling to complete the day's routine up to 9pm - as usual). Branches had to hasten remitting the TDS without any verification," says a letter sent by Satish Shetty, General Secretary, Corporation Bank Officer's Organisation (CBOO) .
According to Mr Shetty, there are several instances of TDS being deducted even for customers who have submitted Form15 G and Form 15 H. He says, "The problem is recurring, more subsequent to renewal of deposits."
Another issue faced by bank branches is inability to remit TDS in real time. By 7th of every month, bank branches remit the TDS for the previous month through net banking. Branches credit the TDS complied in a transient (temporary) current account. However, the balance in a transient current account is not updated immediately in net banking, making it impossible to complete the remittance on the same day. This results in bank attracting penalty for delayed remittance of TDS.
"This phenomenon has been repeating almost every month straining the officers - physically and mentally. The fears of penalty due to short collections and remittance on account of customers from whose accounts TDS should not have been deducted have been haunting the officers," Mr Shetty alleges.
To overcome these issues CBOO has suggested three measures. This include, compilation and remittance of TDS from the Head Office instead of at branch level, not the held the branch officer guilty for issues related with TDS remittance and fix reasons for wrong TDS deduction from accounts where the customer had submitted relevant forms.
Under section 194A of the Income Tax Act, banks are liable to deduct TDS at the rate of 10% on the interest earned, if the interest income for the year is more than Rs10,000. However, if the depositor does not furnish permanent account number (PAN), the bank had to deduct TDS at the rate of 20%.
Bank FD holders whose total interest income for the financial year is below exemption limit (Rs2.50 lakh) and total tax payable for the year is nil, can submit form 15G (for those below 60 years) or 15H (senior citizens) to avoid TDS deduction.