Nafcub calls for the abolition of income tax


Nafcub Chairman Jyotindra Mehta has written a letter to the Union Finance Minister emphasizing the expectations of the cooperative sector with respect to the budget. Mehta has covered almost all the issues that plague different industries including UCB, Credit Unions, Income Tax and many more.

We will replicate the same sector wise until budget day. Today we discussed issues related to the Department of Finance.

Mehta says NAFCUB has already submitted a letter to Union Finance Minister Smt Nirmala Sitharaman and MoS for Finance Dr Bhagwat Karad which includes questions for consideration on Union budget and others central government and RBI matters.

“We attach below the issues raised in our submission with the explanation in the submissions on each issue, for your benefit. A follow-up will be done on these points. If the federations/banks have additional issues, they can forward them to us so that we can make additional proposals to the Honorable Minister of Finance,” Mehta writes.

The letter calls for “the restoration of the u/s 80P(2) deduction to UCB”. Until 2006, UCBs enjoyed the benefits of income tax deduction under section 80P(2) of the Income Tax Act 1961. of this vital deduction available to them under this AY Toll Article 2007-08.

This has led to higher tax liabilities for UCBs eating into their reserves. Since the majority of UCBs are small and member-run banks, they struggle to pay higher income taxes.

“On behalf of our UCB members, it is requested that said subsection (4) of Article 80P be deleted so that the deduction available under 80P(2) prior to AY 2008-09 is reinstated for UCBs and that they be enabled to effectively serve broad sections of the population who have limited means,” the letter reads.

Nafcub’s letter also requires the inclusion of deposits with unscheduled co-operative banks for eligibility under section 80(c)(xxi) of the Income Tax Act 1961. Clause (xxi) was introduced in Section 80 (C) of the Act in 2006 to include a term deposit for a fixed period of at least 5 years with a bank scheduled to be included as investments eligible for deduction for the purposes of Section 80(c).

Of the 1539 urban cooperative banks, only 54 are scheduled banks. Unscheduled urban cooperative banks are excluded from this advantage and they are disadvantaged because of this discrimination compared to scheduled UCBs and nationalized banks.

This leads to the transfer of deposits from non-regular cooperative banks to regular banks. Since very few centers in the country have scheduled cooperative banks, middle/lower class depositors in remote rural towns do not find many options for investing in such deposits with UCBs.

However, as unscheduled cooperative banks are numerous and spread across almost every city, they are better placed to serve these depositors in a localized and easily accessible environment at very low cost and effort. In the event that unscheduled co-operative banks are granted eligibility to accept deposits benefiting from the u/s 80C deduction of the Income Tax Act 1961, such depositors will not only have a greater number of options, but will also find it easier to invest in these unscheduled banks. UCB available in their neighborhood or nearby.

Accordingly, it is proposed that clause (xxi) be amended to i) include the words “and a cooperative bank” after “regular bank”; (ii) add in the explanation “and a cooperative bank means a state cooperative bank, a central cooperative bank and a primary cooperative bank, as defined in Article 5 (as amended by Article 56 (AACS) (cci) of the banking regulations law of 1949”.

Source link


About Author

Comments are closed.