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| The increase in service charges has been demanded not only as a compensation for the heavy investment in hardware/ software, required for establishing online connectivity between banks branches, the income tax department and the Reserve Bank of India (RBI), but also for losing the benefit of retaining the tax money for around seven-days. |
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| Banks, under the online tax accounting system (OLTAS) dispensation, will soon be required to submit information on tax collection to the income tax department online. The impact of this will be that the seven-days of free-of-cost float funds, which banks currently enjoy, will simply vanish. |
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| The current service charge of Rs 11.80 paise per hundred rupees of tax collected is not related to the cost of service or the cost of transaction, complain the banks. |
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| "The benefits derived from float funds are useful, to some extent, in meeting the gap between cost of handling government business and commission received on transactions. The online transmission of collection details will result in immediate settlement of funds with RBI and the banking system will be denied the benefits of float funds," said a senior public sector banker well-versed with the developments. |
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| The Vijay Kelkar Committee has warned that only banks having adequate computer infrastructure for online collection of cheques and online transmission of data will be authorised to collect direct taxes. Over 10,000 branches of commercial banks are currently authorised to collect direct taxes. |
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| The objective of setting up the OLTAS is ---- (a) to discontinue the multi-level paper based manual accounting systems in the central treasury units of the income tax department, RBI and the zonal offices of banks; (b) online transmission of information relating to tax payments and refunds from collecting banks to nodal banks and from there to an intermediary, called the central tax depository (CTD), and income tax department on real time basis so as to eliminate manual verification of challans by assessing officers. |
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| Further, OLTAS will facilitate payment of taxes through single challan with permanent account number of the tax payer being the key identifier. It will extend new facilities for convenient payment of taxes by taxpayers through net banking and provide limited access to taxpayers to view particulars of their tax payments through internet. |
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| The OLTAs is expected to ensure confidentiality, security and authenticity of information travelling from the collecting banks to different users. |
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