Wrong TDS by Bank? Here is where the problem lies
Moneylife Digital Team 07 November 2017
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.
Comments
diptiganguly49
1 year ago
15G or15H . never scrutize by banks.They make entry only on the basis of customer ID.if name a.d id no do not tally they work only on the basis of cus id. Then whats the utility of fill up the form this should be stoped.Is is not possible for the customer to file income tax return for refind .i think checking in the level os bank is mandatory .
Amrik Singh
4 years ago
If the 15G form is submitted to the bank but they do not add/update it in their system, what can be done by depositor if TDS is deducted? Can any action be taken against the bank?
Uday Mukerji
4 years ago
SBI has adopted a new policy: they started refusing to give Form 16A to their depositors. Wonder how big is the scam and who else is involved. I also found out they had conveniently deducted twenty percent TDS instead of the usual ten percent even after having the PAN cards. Complaints to the chairman and the CEO still remained unanswered.
sarita chand
4 years ago
This is unforgivable. State Bank of India has messed up TDS for millions of customer service this year as their staff and systems were not fully trained for consolidation. Who will bear the penalty? To date they can't solve the issue. Wake up IT department.
V.Krishnamoorthy
4 years ago
The finance ministry allowed REPCO BANK to do banking business without deducting TDS on deposits till 2015. I feel the banks must clearly indicate the tax payable every quarter when they release one FDR so that the depositor knows the TDS payable upto the date of maturity. This can be done in a covering letter enclosing the FDR. Now we do not know whether the tax deducted is paid to the Govt. account for a very long time. Very often we know it only in the month of June-july. If an individual is expected to pay advance tax, I wish the banks can issue a letter for the total tax payable for the FD which I can directly pay as advasnce tyax. I say this because, the contract is the bank to pay interest for the deposit and depositor is to pay tax on the interest earned. why should I allow the bank to detain the TDS amount, with out paying interest to anybody and put me under obligation to pay tax in case the the TDS is not paid to the Govt. in time. AS a senior citizen is not expected to pay advance tax, why the governmet should allow the FDRS be paid with full interest and demand the tax there for directly within the time to file the ITRs. when REPCO Bank was not deducting TDS from the full interest, I paid the tax payable as advance tax and the balance if any at the time of filing my ITR.
RAMESH VASWANI
5 years ago
Mr Acharya is right. Corporation Bank is still 5 years back and doing mannual work burdening its staff with unnecessary work. I had very bad experience of Corporation Bank due to this. I got a cheque from my client from Kalyan and went to Mulund Branch of Corporation Bank for encashment, but was surprised to decline the payment for the reasons that the cheque is payable at Kalyan, though it is latest cheque and payable at par. I insisted on return memo and it took one hour for the Assistant Manager to issue the return memo - not payable at any other branch, while almost all banks encash their cheques issued by their branches upto certain cash limits. So it is expected of Corporation Bank all such things.
B. Yerram Raju
5 years ago
I agree with Mr. Chandragupta Acharya. Several Bank branches do not update the 15G/15H that could be the reason. In respect of renewed deposits which is automatic if there is no specific direction of the Depositor the way to deal with his deposit, even the validity of 15G/H should also be automatic and to this degree the action has to be originated from the Income Tax Department as a policy direction. In so far as Corporation Bank is concerned it could be a specific case and has to be dealt with by the Bank with the IT department.
Nawal Kumar Handa
Replied to B. Yerram Raju comment 5 years ago
Suggested that the principal of auto application of 15H/G may also be applicable on reinvestment of FD on the same day or next working day of the Bank.
I think there are 40/50 percent of retirees from public undertakings living on interest income and are not getting any pension .
They prefer to reinvest on short term basis of 2years or so.
After retirement , the thinking on living conditions of pensioners is different than getting one time settlement.
SAMIR ROY
5 years ago
1. As per Interest Certificate – Interest Paid - Rs 40,091/- Accrued Interest - Rs 34,018/- As per interest certificate by Bank Total interest is Rs 74,109/- but as per 26AS interest paid Rs 23,602/- Tax deducted Rs 2361/- The branch refuses to give a detail explain as to why this difference
M. T. Chiddarwar
5 years ago
Too much of delay in issuing tds certificates, despite repeated visits to the banks. This is a bug irritant and pain in April May when we want to file our returns and filing of I T returns is delayed because of no availability , of tds certificates. All tds certificates must be made available to us not later than 15th May.
p m mohamadali
5 years ago
As a senior citizen and physically handicapped,I am eligible for tax excemption I do not come under tax payable and filed TDD form but one deduct


Some banks I strict and arrogant but some are liberal
Vishwanath
5 years ago
There is no transparency at all. How the interest was earned, was it calculated for the financial year and then a figure arrived at for the quarter? Simply get a statement saying interest earned and TDS deducted. Banks need to show actual workings on how the interest income was arrived at, period, rate of interest etc. Only then it will be cleared. Also banks deduct TDS every quarter and supply statements. They should also issue an annual statement with consolidated figures. Also many a times, there is delay by banks in depositing the TDS amount.
Chandragupta Acharya
5 years ago
For banks working on Core Banking Systems, the entire process of TDS calculation, deduction, dispatch of TDS certificates etc. is automated. At defined intervals, system calculates the TDS and passes the accounting entry to debit the customer and credit the internal TDS Collection GL. In most such banks, the remittance to the government is also handled centrally by Accounts / Finance. Branches have no role to play anywhere in this. The only place where branches have a role to play is to update Form 15G / H manually in the system when submitted by the customer across the counter. Sometimes, even this task is done centrally by the back office Processing Cell. There is nothing in the entire TDS process which may “strain the branch staff – physical or mentally”. If Corporation Bank (the only bank mentioned in this article) is facing problems even in this simple task, they need to re-look their own processes and fix the gaps.
Sriram K
Replied to Chandragupta Acharya comment 5 years ago
My wife works in Syndicate Bank and handles the TDS. The process explained here is exactly the same as followed in her bank too. Updating the process has its own costs and with banks being under stress of NPAs do not wish to update the system and re-train all the staff. Also with the knife of impending banks merger, most banks are hesitant to take any reformative tasks right now.
Gary Ar
Replied to Chandragupta Acharya comment 5 years ago
U r right ! Seems like Corporation Bank is still following old method of branches paying TDS through Net Banking . Need to update processes.
Radhakrishnan PP
5 years ago
IT dept has started calling for 15g/15h forms given by customers for previous years-some bank branches which has not kept proper records are in trouble and they are asking customers proof of filing tax return
Mahesh S Bhatt
5 years ago
Can somebody audit we have also suffered with no recourse from HDFC bank.Mahesh Bhatt

Nawal Kumar Handa
5 years ago
Fully agree with the news item.
On account of merger of banks with SBI, the merged bank staff Wes not fully trained to implement / use the software of SBI bank.
All type of mistakes like computation of total TDS , deduction of TDS even the respective form submitted, Deduction of TDS on reinvestment of FD, etc. exists while compiling the tax.
Software of Income Tax Dept. clearly indicate the mismatch of the figures of form 26 AS & Form 16 issued by the bank.
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