NBFC-AFCs regulatory body for I-T exemptions at par with banks

Finance Industry Development Council (FIDC), the self regulatory body for NBFCs-AFCs, has demanded the Finance Ministry to bring it at par with banks in terms of taxation issues and provide exemptions.
The body also wants to have a refinancing window as there are constraints related with fund-raising.
"We are at par with banks in terms of regulation. But there are tax issues which we have been facing, which are not available to NBFCs but to banks, MFIs, and HFCs.
"Under the existing provisions in the Income Tax Act, the provisions for bad and doubtful debts made by banks are allowed as a deduction to the extent of 7.5 per cent from the gross total income and 10 per cent of aggregate average rural advances made by them. However, the benefits are not available to NBFCs," FIDC Chairman Raman Aggarwal said today.

The body had also made a presentation to CBDT Chairperson Anita Kapoor last month, demanding for the provision I-T Act as applicable to banks and other financial institutions.
FIDC has asked the Ministry to extend the benefit of I-T Act's section 43D that recognises income on NPAs during the year of receipt.

"RBI norms says you are supposed to receive it on receipt basis, i.E., when you receive it. Section 43 of I-T Act also says the same thing, that income on non-performing assets (NPAs) should be on receipt basis not on accrual basis. But this does not apply to us," Aggarwal said.

Among others, FIDC seeks to be given exemption for Tax Deduction at Source (TDS).
"Every EMI that every corporate borrower pays to me is supposed to pay TDS. This creates an operational issue. It is against the agenda of ease of doing business. Banks have this exemption, so we are seeking this exemption," he added.
Besides these demands, FIDC wants a refinancing window as it is facing financing constraints.
"One key issue today facing the sector is funding. There is a constraint in fund raising avenues. We cannot accept deposits as per RBI rules, but other revenues are not there.

"There is a case of developing refinancing window on the lines of national housing banks which is there for housing finance companies. Something of this sort can be done for us," FIDC said.
Also, FIDC is now seeking to reposition itself which is already thrusting the agenda of financial inclusion.
"We are seeking repositioning of Non-Banking Finance Companies (NBFCs). In terms of lending, people will talk of banks and MFI, nobody talks about NBFCs. So that role needs to be identified. We cater to the unbanked, we are the first to do that."
FIDC said it is engaging with other stakeholders such as bank associations, transporters body, automobile manufacturers as well as industry bodies to reposition itself.