System glitch deducts 40% amount as TDS from SBI depositors’ account!

System glitch deducts 40% amount as TDS from SBI depositors’ account! - Moneylife

Please go through the above article. This will reveal how SBI had deducted higher tds than the correct tax from the interest on deposits of its customers. It had deducted tax four times more than what is due as per the provisions of the Incometax Act. 

There are several cases where the banks deduct tax on interest on fixed deposits. But tds returns were not filed by the banks. 

I have found in several instances, where tds returns were filed but wrong PAN numbers quoted resulting in denial of refunds to the depositors.

These defaults by banks resulted in depositors not getting their correct tax refund. This is despite several reminders by the customers to the banks both orally and in person.

The bank managers welcome all the customers when the deposits are made, give them coffee, calendar etc. However when problems arise later in tds etc, the managers do not respond with the same courtesy. They treat you like an enemy and ask you to wait forever. You will not be even offered a seat in the Branch Manager's Cabin and be asked to meet the clerk who looks after the tds affairs.

Now I would like to give a specific case. One of my clients had some deposits with Corporation Bank, Erode. The bank had deducted tax at the rate of 20% of interest on deposit instead of 10%. 

The customer was not informed of the same. He came to know of the tds deduction after three years, when he went to renew the deposit. To his utter surprise, the amount renewed for the fresh deposit was less than the maturity amount quoted in the earlier deposit. Only when he enquired in to this discrepancy, he came to know of the fact of tax being deducted from the interest for the past three years. He was neither informed of the same, nor given the tds certificate as per law. Had tds certificate in Form No 16A been given, he could have either set off the tds deducted against his incometax dues or if his income is less than the taxable income, he could have got the refund from the Incometax department. The relevant tds certificate in Form no 16 A was not given to him for all three years.

 It transpired that the bank had wrongly deducted 20% tds on the interest, on the assumption that the depositor had not furnished his PAN No. The normal deduction of tax on the interest is 10% if the interest income from that deposit exceeds Rs.10000 every year. The penal rate of 20% is to be applied if the depositor fails to furnish his PAN number.

It was brought to the knowledge of the Manager that the PAN number is already available in the Customer Id of the depositor. The PAN number was given by the customer, when the deposit was made. The Manager initially denied the availability of PAN in the customer id. Since the Customer was having internet banking facility, he was able to prove that PAN is there in his customer id by taking a print out of this customer id details.

The mistake was committed by the person to whom the bank had given the job of preparing the tds return, which is normally outsourced externally. The staff of the bank had omitted to furnish the PAN number to such outsourced person, resulting in double deduction of tds. 

By the time customer came to know about the deduction of tds from his interest on maturity of the deposit after three years, he had already filed his returns of income for all three years by offering the full interest due and paid tax thereon from his pocket.

Now it is not possible to get any refund from the department as the refunds were time barred. You can file a revised return only for the current year and one year earlier.

The bank can easily solve the issue if the relevant tds return is revised by filing a revised return. The cost of such an effort is about Rs.100 only. If it files the revised return, then the credit for tds related to his PAN will appear in AS 26 of the depositor. Any person can view his tax credits in Form No: AS26 in the web site of the Incometax department after giving his PAN as his user id and correctly quoting his password. 

The customer can then, file a Rectification Petition under section 154 of the Act and attempt to get the refund.

Even now the Bank which is supposed to file a Revised Return of its tds return and later give a Form No 16A is not obliging the depositor despite several visits to the bank by him.

Such is the attitude of the bank officials. The growth in deposits had fallen during the last few years in India. The improper documentation and tds troubles are also some of the reasons for the fall in growth of deposits. How do you expect a lay man, especially a senior citizen to understand all these technicalities? 

You cannot fault the citizens when they go to chit fund companies and fly by night operators if the organised bank sector operates like this!

I will be giving you several instances where the faulty tds mechanism, the mistakes and defaults of the tds deductors, continuing problems with the Income Tax Department's Web site, "Traces", cause innumerable problems to the tax payers in my forth coming posts.