Indian Banks’ Association (IBA) wants the finance ministry to reconsider its order restricting agency-banks from tie-ups with other banks for collection of direct taxes. IBA maintains this restriction has created problems for companies. The Central Board of Direct Taxes had asked all the agency banks not to enter into any tie-ups with non-agency banks for collection of direct taxes. Any agency-bank entering into such arrangement with non-agency banks for tax collection of entities other than FPIs would be de-authorized, it added. Agency banks are those lenders which are authorised by the government to collect taxes. IBA sent a letter to the Chief Controller of Accounts, CBDT, saying existing arrangements have been in place for several years now and have been of immense benefit to customers who can use their existing bank accounts towards all their payment obligations including direct tax payments. CBDT had brought in the restrictions following a report by the Public Accounts Committee expressing concern over practice of some agency banks offering facility of collection of direct taxes to some ‘non-agency banks’. The department of financial services has termed the practice – allocation of government business to private sector banks and use of net banking facility for e-payment of direct taxes through agency-non-agency bank tie-ups as unauthorised and irregular.
