Non-filing of banking tax returns may attract penal provisions

The finance ministry is considering an amendment to the Finance Act to include penal provisions for banks which do not file monthly returns for the banking cash transaction tax.

The move comes after the revenue department received complaints from its field formations regarding non-cooperation by some banks.

The revenue department, on an average, receives 250-300 BCTT returns every month while the average tax collected is Rs 20-Rs 40 crore.

Officials said an amendment was needed since the Act allowed for only annual returns for the BCTT.

"Despite this, the revenue department has asked banks to file monthly returns since it is keen on unearthing unaccounted business transactions by looking at parameters such as frequency of transactions, volume of withdrawals, multiplicity of accounts and nature of businesses," an official said.

"While compliance by the banks has improved substantially, a few banks are still not filing the monthly statements," the official added.

BCTT is levied at a rate of 0.1 per cent on cash withdrawals exceeding Rs 25,000 from an account (barring savings account) maintained with a scheduled bank on any single day and encashments of term deposits exceeding Rs 25,000 in case of an individual or Hindu Undivided family and Rs 1 lakh by other persons on any single day.

The BCTT returns are received by the revenue department in an electronic format after which the data is uploaded by the income tax department on its computers.

The tax department then selects branches for investigation on the basis of a select criteria, which include a branch with two or more accounts with the same address, accounts of individuals or small concerns from which large amounts have been withdrawn and the motive for withdrawals.

The branches which are selected are then forwarded to the field officers for further investigation.