Tax Torture

The common man is burdened not only with paying taxes but complying with the maddening laws that come with severe penalties. This pain and anguish is exacerbated when the taxpayer has to run from pillar to post for something as simple as getting credit for the taxes already paid. Ameet Patel, chartered accountant and tax partner at SKP group, has an insider’s view of how horrible the situation has become, thanks to three developments—computerisation, tax-deduction at source (TDS) and collection targets set for tax officers. He explains, with real-life examples, the biggest problem that most taxpayers face today—getting credit for the taxes paid by them—in particular, for TDS. He brings to light the brazenness and insensitivity of the tax officers. Don’t miss this Cover Story on our rotten tax system by a tax expert.

In her Crosshairs section, Sucheta writes on how RBI governor, Dr Raghuram Rajan, has made a strong pitch for a level-playing field for bank customers. While Dr Rajan mentioned several vexing issues that banks have ignored for years, he is yet to touch upon the areas that cause serious losses, or harassment, to customers, like the rampant mis-selling of third-party products.

Sucheta, in her Different Strokes column, discusses the vexing issue of gas prices and the influence of Mukesh Ambani. The Congress-led UPA was all set to double gas prices in April 2014, but for the Election Commission’s order to defer it till 16th May. This will be the first big decision for the new government. If you are curious about the gas pricing issue, do not miss a new book that has just been launched, Gas Wars, by veteran journalist Paranjoy Guha Thakurta.

Corporate fixed deposits have been a popular option since the 1980s. But, since these are unsecured, many companies took investors for a ride. The new Companies Act provides some safeguards; SD Israni explains these in his column.

As always, do write to us about what you would like us to focus on. And don’t forget to check out our new service, Moneylife Smart Savers Network. Its meant for everybody.



This is with regard to “Subrata Roy of Sahara Meets the Law” by Sucheta Dalal. The national economy is being damaged by a large number of companies involved in the illegal business of taking huge public deposits. This activity may even have implications for national integrity and security, apart from the risk to investors. The following facts have been gathered from newspapers and through information obtained from friends and relatives:

(a) As per the advertisement issued by Sahara India, it has deposited Rs700 crore TDS (tax deduction at source) with the income-tax department. Certainly, Sahara must have deducted Rs700 crore tax on the interest of a minimum of Rs7,000 crore. Is it not a matter of concern for any agency and even regulator like the Reserve Bank of India (RBI) and Security and Exchange Board of India (SEBI)?

(b) As per the order of Honourable Supreme Court, Sahara India is supposed to refund Rs24,000 crore to investors. The Sahara group is continuing to collect deposits from the public under different schemes like daily, monthly and fixed deposits. It is reported that in small places, like Mahagama (block headquarter) in Godda district (Jharkhand), around Rs2 crore is mobilised in a month by Sahara. Probably, Sahara’s  regional office in Bhagalpur (Bihar) mobilises, on an average, around Rs10 crore every month. If this is taken as the minimum amount, it may reach up to Rs5,000 crore in a month.

(c ) Sahara has been sponsoring cricket for many years. I believe, the amount collected from the public was being used to sponsor cricket. Was the source of funding used to sponsor cricket examined by any agency?

(d) Some groups, like Prayag Group, Pratigya Group, Vishwamitra India Pariwar, Sai Prasad, PACL, etc, have been issuing big advertisements regularly in the local editions of Hindi newspapers like Hindustan, Prabhat Khabar and Dainik Jagran in Bihar and Jharkhand. The content and facts of these advertisements explain their working. Neither media nor the officers of regional offices of RBI and SEBI have shown their concern. Even local administrative and police officers have not taken action.

(e) Big programmes like ‘camps’ in the month of Shrawan, Kavi Sammelan, Basant Mela, Kisan Mela, etc, are organised by various groups along with the local newspaper. In fact, some local newspapers and politicians have played a vital role in the promotion of illegal business of these companies.

(f) Big hoardings are being displayed by these groups in prominent places in many cities.

(g)  Saradha group of West Bengal fled after mobilisation of around Rs30,000 crore.
Various groups/companies are operating under these names including: Sahara Group, Pratigya Group, Vishwamitra India Pariwar, Sai Prasad, PACL, Roofers India, Apna Pariwar, Rose Valley, Alchemist, Geetanjali, Arshdeep Finance, Aim Fill, Sunshine, Sunplant, Real Bond, Triolian India, Suraha, Active Group and Global Trust, etc.
This shows how well the economy is being regulated!

Sanjit Kumar, online comment


This is with regard to the Cover Story in Moneylife (3 April 2014) on mis-selling of life insurance. In the article, you have named corporate agents, brokers and telemarketers for mis-selling of life insurance. How could you have missed out bankers who are indulging in it on a huge scale?

Satyadev Verma, by email

Raj Pradhan replies:
The Moneylife Cover Story did cover bank personnel-related fraud. The third point in the Cover Story is “Frauds by Banks and Insurer Branch/Agent”. It has the example of an HDFC Bank-related case. But the kind of fraud perpetuated by telemarketers, corporate agents, brokers, who are involved in selling over the phone, is in a different league than mis-selling under bancassurance. Over the phone selling, after building trust and making fraudulent offers of ‘interest-free’ loans is not seen in mis-selling by banks. This is because it will be easier to arrest a banker who mis-sells than those who do so over the phone. Hence, the focus of the Cover Story was not on bancassurance-related cases.


This is with regard to “Silence over the Loot of PSU Banks” by Sucheta Dalal. RBI’s transparency is merely on paper. It releases documents for comments and discussion but always places only its draft submissions on the website. What prevents RBI from making known to people the suggestions it receives and those which it rejects?

Secondly, how on earth does RBI allow thousands of crores of rupees of lending to turn into NPAs (Non-Performing Assets), when it has regular information on the corporate loans sanctioned, directors’ interests, CDRs (Corporate Debt Restructuring), etc? An RBI representative sits on the PSB (Public Sector Bank) boards. Is there regulatory arbitrage? Therefore, is RBI a silent spectator on the misdemeanours of banks?

The latest issue of The Economist commends two institutions in our economy and body politic—RBI and the Supreme Court. We definitely take pride in these. But the recent happenings at the United Bank of India—of allowing the chairperson to voluntarily retire after the huge NPAs surfaced—leaves many in doubt.

Yerram Raju Behara, online comment


I am a regular reader of Moneylife. Furthermore, as a senior citizen whose family depends solely on interest from savings with the bank, I would like to bring the following points to your readers’ attention.

Banks are doing their business mainly by borrowing money from the public which is lent out to others. In both cases, interest is the main factor. Banks pay interest to the public, i.e., those who keep their savings with banks and, simultaneously, banks collect interest from those who borrow the funds. Bank charges a higher rate of interest from the borrowers than the interest rate they pay for depositors’ funds.

Another vital factor is in play, in this business. Though the bank collects interest on a monthly basis, it pays interest to the public quarterly on term deposits and half-yearly in case of other deposits. The Reserve Bank of India, the main banking regulator, is fully aware of this practice and, to protect the depositors from bankers, it issued a circular (DBOD.No.Dir.BC. 69/13.03.00/2013-14 November 29, 2013) which reads: “Banks will now have the option to pay interest on rupee savings and term deposits at intervals shorter than quarterly intervals.”

The circular appears very pro-depositors; but although three months have passed since it was issued, no bank has yet started paying monthly interest either on savings or term deposits. A perusal of the RBI circular makes it clear that RBI has purposely used the word OPTION—which means it IS NOT A DIRECTIVE, but a simple request to banks. Therefore, to follow it or not depends upon the discretion of the banks. UCO Bank has introduced a new fixed deposit scheme where monthly payment of interest has been provided.

Paying interest on a monthly basis will be a great financial help to those who depend mainly of bank interest. Hence, RBI should have played a more proactive role. However, the above-mentioned circular is a glaring example of how weak a financial regulator we have in our country. I would request Moneylife to look into this area.

Bipulendu Basu, by email


This is with regard to “On your marks, get set and GO! With the Datsun” by Bapoo and Divya Malcolm. This review is so enjoyable mainly because Malcolm & Co bring their personal perspective on a vehicle, quite different from an auto journalist’s take. It felt like a real customer’s opinion, with a lawyer’s eye for detail!

Jerin Chacko


This is with regard to “UBI: Questionable Appointment” by Sucheta Dalal. There is an Assamese saying: ‘fish starts decaying from the head’. This holds true in the case of United Bank of India which was headed by Archana Bhargava; it decayed from the head. So long as there is political clout in selection of CMDs (chairmen & managing directors), banking organisations remain susceptible to get more Archana Bhargavas as their head.

Ramesh Jaradhara


This is with regard to “MCA & ICAI’s mantra: Invest in PSU IPOs!” Nice investor education this. Beginners will surely get an early lesson... about what NOT to do. And, in equity investing, the Dont’s are far more important than the Do’s.

Nilesh Kamerkar


This is with regard to “Aadhaar: Once allotted, you can never cancel it, reveals RTI” by Vinita Deshmukh. Never expected that a respected person of Nandan Nilekani’s calibre would be so lax about other people’s identity. Where is his Infosys motto: “Powered by trust, driven by intelligence”? He has betrayed our trust! Very sad.

Hemlata Mohan


This is with regard to “Can RBI’s policies alone tackle rising NPAs deftly?” by Abhirup Ghosh. I am in full agreement with what has been said. The CMDs of banks get away, while the others (lower-ranking officials) are made sacrificial goats. As long as the fear of the Central Vigilance Commission dangles like a Damocles’ sword, honest bankers can never perform without fear. The ever popular comment in banking circles is that “only industries are sick; the industrialists are healthy.”

SK Nataraj


Sensex, Nifty may put in a short rally : Wednesday closing report

We are expecting a quick rally in Nifty from around 6,625

Today again the domestic indices ignored the positive global cues and closed in the negative for the third consecutive session. In each of the past three sessions the indices have been booking higher losses each day. As we had mentioned yesterday that the Sensex, Nifty might witness a range bound session, today the benchmark opened in the morning and moved close to yesterday’s close until 12 noon after which it slipped into negative and continued to move lower and closed near the day’s low.


Sensex opened at 22,487 and moved to 22,534 and closed at 22,277 (down 208 points or 0.92%). Nifty opened at 6,727 hit a high of 6,749 from where it edged lower to hit a low of 6,665 and closed at 6,675 (down 58 points or 0.86%). The NSE recorded a volume of 82.69 crore shares.


The price of petrol was cut by Re0.70 a litre, excluding local levies, the second reduction in rates this month as appreciation of the rupee against the US dollar made oil imports cheaper. With the late price revision, retail selling price at Delhi had declined by Re0.85 a litre, IOC said. There was no change in diesel prices.


The market sentiment was hit adversely after private weather forecaster Skymet on Tuesday, 15 April 2014, said it expects the June-September monsoon to be below normal this year. The forecast of below-normal rains triggered worries that food price inflation will edge up.


Tata Steel said after market hours on Tuesday said that it completed the financial year ended 31 March 2014 with an overall increase in production and sales volumes. The year registered its best performance in hot metal, crude steel, saleable steel production and total sales. Tata Steel was among the top two gainers in Sensex 30 stocks.


Tata Power today said that it plans to increase its renewable energy capacity by about 71% to cut carbon emissions and reduce risks from fluctuating fuel prices. This will add 646.7 megawatts of renewable energy capacity. The stock was the top loser among the Sensex stocks.


Future Retail came out as the top gainer in ‘A” group on the BSE on the back of media reports that Future Group is set to acquire southern supermarket chain Nilgiris which is a leading retailer and food brand in south India, having around 140 stores mostly franchisees.


US indices closed in the positive on Tuesday after first rising and then falling sharply earlier in the session. Economic data showed manufacturing in the New York region grew at a slower pace in April while the cost of living in the US rose more than projected in March as food and rents became more expensive. Confidence among US homebuilders rose less than forecast in April.


The US Federal Reserve is considering further steps to force big banks to hold more capital, and sees a case for other stability-enhancing measures for more shadowy areas of Wall Street as well, Fed Chair Janet Yellen said on Tuesday.


Except for KLSE Composite (0.46%) and Seoul Composite (0.06 points) all the other Asian indices closed in the green. Nikkei 225 (3.01%) was the top gainer.


China's expansion slowed to the weakest pace in six quarters, testing leaders' commitment to keep reining in a credit boom and pollution as risks mount of missing a 7.5% annual growth target. However, the growth was slightly higher than market expectations. Gross domestic product rose 7.4% in the January-to-March period from a year earlier, the National Bureau of Statistics said today in Beijing.


Retail sales in China rose 12.2% in March from a year earlier, accelerating from a 11.8% on-year rise for January and February, data from the National Bureau of Statistics showed. Retail sales also increased 1.23% in March from February. In February, it rose 0.71%.


European indices were trading in the green. US Futures too were trading higher.


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