According to CAIT, traders have lost business of over Rs75,000 crore during the past two weeks of their strike. The government should come forward for an open debate on imposition of the LBT, the traders' body has demanded
The apex court had on 21st March upheld his conviction in the 1993 Mumbai serial blasts case which it said was organised by underworld don Dawood Ibrahim and others with the involvement of Pakistan’s ISI
State Bank of India has admitted that a human error in setting parameter in its system led to deduction of income tax or TDS @40% for FY13 from accounts of its special term deposit holders. SBI is in the process rectifying the issue, but not all depositors will see their entries reversed as yet. How is a common saver supposed to know such deductions from his ‘trusted’ bank and whether there are any costs attached?
State Bank of India (SBI), the country’s largest lender, shocked a number of its customers by lopping off income tax at the rate of 40% as tax deducted at source (TDS) for FY2012-13. When several account holders, of its special term deposit scheme, (these are deposits created automatically by system based on the threshold amount set by depositors in their savings bank-SB plus accounts-multi option deposit or MOD) complained, the lender restored the amount. However, there are still 6,118 account holders who, according to SBI, will have to bear “notional loss of interest”.
According to SBI, the impact of this erroneous parameter change (esentially a human error in setting parameter) was limited to only one term deposit product, special term deposits-multi option deposit (STDR-MOD), out of its around 2,358 such products.
In an email reply, a deputy general manager at SBI’s IT-core banking (business operations and support) division, said, “We observed on 2nd April that for a particular type of special term deposits excess amounts have been deducted as Income Tax. As we had not made any software changes, it took us some time to locate the source of error. Due to an inadvertent parameter change for the particular product in the system, TDS was deducted at a higher rate. On detection of the error, immediate steps were taken to systemically restore the excess TDS in all the concerned accounts, except the accounts, where it was technically not feasible to restore credit into the original account. In case of all such accounts, credit of amount involved has been afforded to the linked SB accounts of the customer concerned. The entire rectification exercise was completed by 12 April 2013”.
While SBI admitted to have credited back the excess TDS into customer’s savings accounts, it has neither restored the same in the fixed deposit (FD) accounts affected nor compensated such account holders for the loss of interest.
"As a step to minimise the inconvenience and interest loss to the affected customers, we are in the process of issuing similar STDR-MOD accounts for each of these accounts, with the excess TDS amount. This process is expected to be completed by Saturday," SBI said in an email.
Due to the wrong deduction of TDS, several account holders of the state-run lender received lower interest rate on their deposits. Some even had to pay penalty for pre-mature withdrawals (especially FDs that were less than seven days old). The wrongly debited money was credited into their savings account several days later. Therefore, the customers
(i) got lower rate of interest on fixed deposits,
(ii) paid penalty for pre-mature withdrawal,
(iii) no interest was paid between amount debited from fixed deposits and amount credited in savings account, and
(iv) amount credited in savings bank account earns a lower rate of interest, that too from the day such amount was reversed.
Apparently, not all depositors will find their entries reversed or rectified due to technical reasons. When asked if unfortunate depositors will be made good on the losses, SBI said, “Our branches are being suitably instructed to make good these notional losses by manual interest payment/adjustment, which will be ensured with follow up from our end.”
Furthermore, he said, “There has been no instance where the interest has been paid on a fixed deposit at a lower rate. Since the incident was not in the nature of premature withdrawal, no penalty was levied by the system.”
Whether other banks have audited their IT systems to ensure that this, or for that matter any grave error, does not happen, is not known. SBI admits that that it will take time to rectify the error because it is not familiar with it. The deputy general manager said, “The process being carried out is not a laid down process, hence it is taking some time.”
This is not the first time that the TDS issue has come to spotlight. Many a times, banks are found failing to file tax deducted from account holders leaving individuals and companies with severe penalties. They harass depositors over TDS certificates, especially senior depositors, who have to run from pillar to post to get several TDS certificates if they have multiple accounts.
Moneylife Foundation had earlier sent a memorandum on TDS to the Reserve Bank of India (RBI) and finance ministry, to do away with the painstaking system of obtaining many forms, amongst other things including shifting of responsibilities to banks to ensure proper TDS documentation is obtained.