The depositors of Punjab and Maharashtra Co-operative (PMC) are in a dilemma regarding whether they would get their money back. Alongside, the bank is deducting TDS at 10% on the interest they would have earned on their deposits at PMC.
Banks need to deposit it further to the tax department.Depositors of PMC are not alone in this. Depositors of Non-banking financial companies (NBFCs) also go through the same problem. Whenever the banks or NBFCs are observed mismanaging or inefficiently, RBI restricts the depositors to deposit or withdraw and from their accounts. They do have the right to take strict actions against the institution if they do not work in the best interest of the depositors.
If a bank credits interest in its books of accounts which is in favor of the depositors, it is liable to deduct tax on such interest. The depositor gets complete knowledge about the interest being credited. Depositors, who do not own a business, may not have complete access to their money but still have to pay tax on the interest income.
Naveen Wadhawa, Deputy General Manager, Taxmann.com, said that if a bank is liquidated, no provision exists to claim back TDS. People with higher tax brackets will also lose out on the additional tax they would have paid since TDs banks only deduct tax at 10%.”May
