PSU banks may offer loans to tax return preparers

PSU banks may offer loans to tax return preparers
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First Published: Tue, Apr 10 2007. 02 42 AM IST
Updated: Tue, Apr 10 2007. 02 42 AM IST
A few state-owned banks are working on a scheme to provide soft loans to newly-minted tax return preparers (TRPs) to buy office equipment such as personal computers to help them start business in the current assessment year.
“The loan scheme would be normal commercial transactions with much easier terms,” said a finance ministry official. Details on loan costs were not available, but state-owned banks currently offer education loans of up to Rs5 lakh at interest rates between 11% and 11.5%. Banks started working on the loan scheme after industry body Indian Banks’ Association agreed to the finance ministry’s request to help TRPs, the official added.
TRPs are unique as they would receive a financial incentive from the income-tax department to bring in new tax assessees, the first time in the department’s history that outsiders are to be paid to widen the tax base.
Currently, 3,545 people have qualified as TRPs. As many as 1,254 people who underwent TRP training, but did not clear the final test the first time around, would get another crack at the test soon, the offcial said.
The training for TRPs was completely funded by the government, which held a qualifying exam last year to shortlist people for the training. The income-tax department plans to constantly monitor the quality of work done by TRPs.
Work on the TRP scheme started in earnest after finance minister P. Chidambaram, during his Budget 2006 speech, said it would be introduced.
Chartered accountants (CAs) generally help individual taxpayers to file their income-tax returns if they choose not to do it on their own.
The Institute of Chartered Accountants of India (ICAI) is unhappy with the TRP scheme. It has asked the income-tax department to take a relook at the scheme. ICAI feels that only CAs have the training and requisite skills to handle tax returns, said Ved Jain, the institute’s vice-president. TRPs, unlike CAs, will not be allowed to take up statutory audits such as the ones that need to be filed by companies. In addition, the income-tax department has restricted TRPs’ potential client base and capped the fees they can charge.
A TRP cannot file the return of anyone with an annual taxable income above Rs3,00,000 and their fee has been capped at Rs250. The government, however, has tried to incentivize TRPs to widen the tax base by providing incentives that exceed Rs250 in the event they file returns on behalf of a first-time assessee. Every addition to the tax base of about 3.27 crore assessees (end-March, 2006) through a TRP would result in an incentive of 3% of the tax return, subject to a ceiling of Rs1,000.
Once a new assessee gets into the system, he/she is likely to continue filing returns annually. This would help the income-tax department write off the relatively high initial expenses over a long period and keep the tax collection costs in line with the average.
The cost of tax collection in India is 0.67% of the total tax collected, the lowest in the world, the finance minister had said last year.
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First Published: Tue, Apr 10 2007. 02 42 AM IST