This is with regard to Harjot’s article (Moneylife, 11 July 2013) about ‘tedious’ TDS (tax deduction at source). It has dwelt with the circulars from the Reserve Bank of India (RBI). Section 194A of the Income-Tax Act requires that tax be deducted at source “at the time of credit of such income to the account of the payee or at the time of payment thereof... whichever is earlier.” Some banks insist that they will deduct tax on interest paid by the bank as a whole (deposits in other branches of the same bank will also be taken into account).
Banks pay interest on term deposits either monthly, quarterly, half-yearly, annually or on maturity. In case of periodic payouts, when the amount of interest exceeds Rs10,000pa, tax has to be deducted pro-rata from each payment. When it is required to be credited at the agreed intervals, it has to be deducted before each credit, to comply with the tax deduction requirement of “earlier of the credit or payment.” Consequently, the payee will receive interest net of tax deducted. The TDS certificate, however, has to be furnished for the taxes collected and paid to the treasury. This will make a difference only in cases of re-investment of monthly, quarterly or half-yearly interest accumulations. The annual credits, more particularly for cumulative deposits, will have the annual interest attracting the TDS.
Earlier, some banks sought to get over the requirement of “to the account of the payee” by crediting the interest not to the individual depositor’s account but to “interest payable account” or “suspense account” or by any other name like “provision for interest.” The Finance Act of 1987 plugged this by saying in an explanation, “the provisions of the Section shall apply accordingly.”
This obnoxious tax deduction on aam janata’s term deposit interest income is grossly discriminatory. The Finance Act of 2003 has made it clear that “Provided also that no such deduction shall be made in respect of any dividends referred to in Section 115-O.” The rich and super-rich get away with tax-free dividends and capital gains. But poor elders, pensioners or widows are called upon to cough up taxes from the meagre interest income that they derive from their term deposits with the neighbourhood banks.
Nagesh Kini, by email
Missed Call Scam
I wish to bring to your notice an incident in which I was conned by a missed call scam. I work as an accountant and my job includes dealing with various banks, financial firms, government bodies, etc, as well as speaking to a cross-section of people everyday. I am on the phone most of the time and I regularly call back people who are on call waiting. In June, I received a missed call from an unknown number. As usual, I did not check the number and called back on the missed number. There was a girl at the other end and she spoke in Hindi with an Indian accent. She was speaking softly and slowly and I could not hear her very clearly. In a way, she was dragging the call. Since, I could not hear her clearly, I called her again. She was not very clear and so the call went on for a long time. From what little I could make from the call, she was calling from Lokhandwala and was seeking my personal information. Later, when I saw the bill from Vodafone, I was shocked to find the calls to this number added up to Rs2,050/-. When I contacted Vodafone, they said this call was made to an international number and was charged at Rs50/- per minute. I wonder how that number can be an international one as the girl said she was speaking from Lokhandwala and was speaking in fluent Hindi. I request you to please help me get justice as I feel I am a victim of circumstances.
Sarvesh Mishra, by email
This is a fraud that has been plaguing mobile phone customers for several months now. The callers keep calling and the call gets disconnected as soon as you answer, tempting you to call back. However, to be fair to the service-providers, they have been sending out text messages warning subscribers not to respond to calls that do not start with +91 or are from a number that you do not recognise. Vodafone has certainly been doing this. In this age of technology, Moneylife has been constantly telling people to be alert to new and innovative scams that are being dreamt up everyday. — Editor
Credit and Debit Advice
This is with reference to interest on deposits. I regularly give my 15H form to State Bank of India (SBI) before 15th April each year. My first quarterly interest becomes due after that. Yet, the Bank deducts tax at source for the first quarter and credits the interest afterwards. While I was working with a bank, we had to credit any amount as it was (there was no TDS at that time, but there were postage and collection charges), debit the charges and simultaneously issue an advice which helped customers to know precisely what has happened. One more amusing fact with SBI was that it credited my interest with net amount to one account and afterwards, reversed the deduction to another account. Banks have stopped the system of sending advice. The Reserve Bank of India (RBI) must make it compulsory that for any debit or credit to any account, which is not generated by the customer, the bank must send the advice of the transaction on the same day. So is the case of cheques deposited and returned. With email, it virtually does not cost anything. It should also be compulsory that banks must show the gross entries separately whenever it involves credit and debit. Will RBI take note?
Vaidya Dattatraya Vasudeo, by email
Cash deposit not allowed?
This is with reference to the article on “RBI tells HDFC Bank not to make up its own KYC verification rules” and in appreciation of Moneylife’s remarkable efforts to get better service for bank depositors. HDFC Bank has gone haywire after the Cobrapost exposé and rap on the knuckles by the Reserve Bank of India (RBI). Now, HDFC Bank is not allowing salary account-holders to deposit cash in their own account (in home branch or any branch). They are not accepting cash of a single rupee.
Also, in non-salary account, they are not allowing customers to deposit cash, if the account is not fully KYC compliant. In one case, the account-holder has submitted Form 60 for his savings account, since he did not possess the PAN card, which is perfectly fine as per RBI norms. But the Bank has adopted a policy of not accepting cash deposits (of even a single rupee), if the account is not updated with a PAN card. This applies even if the account-holder tries to deposit cash in his home branch. This rule is applicable even if the customer has withdrawn more money than he needs and wants to deposit it again in the account. The Bank is disallowing all cash transactions, including those which have come from legitimate sources.
Can you please take up such erratic behaviour of the Bank with the concerned authorities?
Harsh Dhanuka, by email
This is with regard to “Turbulence ahead for equity, bonds and gold!” by Debashis Basu & Jason Monteiro. Very well written! I hope many read it and also understand it.
Get Rid of US$
This is with regard to “Where is the rupee headed?” by AK Ramdas. Well, the dollar has virtually become a currency for the world to trade. The need of the hour is to get rid of the US$ and replace it with a currency that is more stable: maybe, a new world currency.
Help the UPA win votes?
This is with regard to “Cabinet clears Ordinance on Food Security Bill.” These decisions are election-year gimmicks with no economic justification. When inflation is driving up the cost of everything and fuel costs are exorbitantly high, is cheap food (mostly contaminated, if you see the quality available at public distribution shops currently) supposed to help the UPA win votes?
This is with regard to “Equity Investors: The Vanishing Tribe?” by R Balakrishnan. Excellent article, Sir!
It is a goldmine out there, for anyone willing to dig patiently. There is a long list of stocks which are being given away at 90% discount from their 2007-08 peaks. Some of them would most certainly appreciate between five and 10 times during the next five to 10 years. The text of ‘Security Analysis’ begins with this couplet from Horace: “Many shall fall that are now in honour; and many shall be restored that are now fallen.”
This is with regard to “Arrogant SEBI’s response to RTI is shocking.” We totally agree with your contention; the matter must be taken to its logical conclusion.
Who will bell the cat?
This is with regard to “Toxic ULIPs: Less than 2% return after 8 years!” by Raj Pradhan. Excellent revelation, but who’ll bell the cat?
This is with regard to “Financial inclusion: Rural credit architecture needs an overhaul” by MG Warrier. My suggestion is: use rural post-offices for banking, provide banking licence to post-offices and technology-enable post-offices!
This is with regard to “Activists fear Ordinance soon to keep political parties out of RTI” by Vinita Deshmukh. If, by chance, parties succeed in getting an ordinance promulgated, they need to return the concessions they received from the government. That is irrespective of the ordinance.
Dr Paresh Vaidya
The Sensex and the Nifty registered gains of 3% each, in the fortnight gone by. The ML...