CBDT clarifies on interest earned by banks on investments in non-SLR securities
PrintListen to this Article
Accepting the Supreme Court’s stance, the Central Board of Direct Taxes (CBDT) has clarified that interest earned by banks on investments in “non-SLR” securities will be taxed only as “business income”, not as “income from other sources”.
The fallout of this CBDT stance is that the Income Tax Department cannot “disallow”, for income tax purposes, the expenses incurred by banks for earning income from non-SLR (statutory liquidity ratio) securities.
Investments in non-SLR securities cannot be considered eligible for SLR requirement, which is the reserve requirement that Indian banks are required to maintain in the form of gold or government securities before extending credit to customers.
The move is expected to benefit banks, as it brings certainty to tax treatment on income earned from investments in “non-SLR” securities. In the absence of this clarity, many field officers were taking the stance that such income of banks was to be taxed as only “income from other sources” and therefore “disallowed” all expenses incurred by banks for earning this income.
The Tax Department was routinely filing appeals when banks were treating such income as “business income”. The CBDT has now clarified that the Supreme Court’s decision in CIT Vs Nawanshahar Central Cooperative Bank Ltd case — although given in the context of cooperative banks — is equally applicable to all banks/commercial banks, to which the Banking Regulation Act 1949 applies.
In light of the apex court’s decision, the CBDT has directed its field formations not to file appeals on this ground. Also, appeals already filed may be withdrawn, the CBDT has said in a circular.
The existing law provides that income by way of interest on securities would be taxed under the head “income from other sources” if it not chargeable under the head “profit and gains of business and profession”.
The apex court had in the CIT Vs Nawanshahar Central Cooperative Bank Ltd case said that investments made by a banking concern are part of the banking business and, therefore, the income arising from such investments was attributable to the business of banking, falling under the head “profits and gains of business and profession”. (The Hindu Business)
Category : CBDT | Comments : 0 | Hits : 428
The Central Board of Direct Taxes (CBDT), has issued Circular No. 07/2024 dated 25.04.2024 further extending the due date for filing Form 10A/ Form 10AB under the Income-tax Act, 1961 (the ‘Act’) upto 30th June, 2024. CBDT had earlier extended the due date for filing Form 10A/ Form 10AB by trusts, institutions and funds multiple times to mitigate genuine hardships of the taxpayers. The last such extension was made by Circular No. 06/2023 extending the date to...
Certain instances of mismatch of information as filed by the taxpayer and as available with the Income Tax Department have come to the notice of the Department as part of its routine exercise of verification of data. In such cases, the Department has alerted the taxpayers to enable them to take corrective action. However, some posts on social media, as well as articles in the media, have highlighted enquiries initiated by the Central Board of Direct Taxes (CBDT) in cases where employees have mad...
The Central Board of Direct Taxes (CBDT) has said the Income Tax department can file appeals irrespective of monetary threshold in cases relating to TDS/TCS, undisclosed foreign income, or information received from investigating agencies like ED and GST Intelligence. As per the present rules, tax authorities are allowed to file appeals before the ITAT, High Court and Supreme Court, if the disputed tax demand exceeds Rs 50 lakh, Rs 1 crore and Rs 2 crore, respectively. These thresholds were fi...
Income of any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in specified sub-clauses of section 10 (23C) of the Income-tax Act, 1961 (the ‘Act’) or any trust or institution registered under section 12AA/12AB of the Act is exempt, subject to fulfilment of certain conditions specified under various sections of the Act. One of the conditions required to be fulfilled by the tru...
Central Board of Direct Taxes (CBDT) on Monday ordered withdrawal of small tax demands that finance minister Nirmala Sitharaman had announced in her FY25 budget speech to improve ease of living. CBDT said that tax demand up to ?25,000 for assessment year up to 2010-11 and demands up to ?10,000 from the next year up to assessment year 2015-16 will be extinguished. However, any criminal action initiated or planned under any law will not be dropped. Any tax demand raised against taxes collect...
Comments