NAFCUB urges FM to reduce income tax burden on UCBs

The National Federation of Urban Co-operative Banks and Credit Societies Ltd (NAFCUB) has submitted to the finance ministry a list of issues concerning the cooperative sector for consideration under Union Budget 2022-23.

In its submission to Union Finance Minister Nirmala Sitharaman and Minister of State for Finance Bhagwat Karad, NAFCUB has stated that till 2006 the UCBs were enjoying benefits of income tax deduction under section 80P(2) of the Income Tax Act, 1961. However, insertion of sub-section (4) to section 80P of this Act with effect from April 1, 2007, has deprived the UCBs of this vital deduction available to them under this section. This has led to higher tax liabilities for UCBs which is eating into their reserves. Since a majority of UCBs are small and are member-driven banks, they are finding it difficult to pay higher income tax. On behalf of the member UCBs, NAFCUB president Jyotindra Mehta, has appealed to the finance ministry to abolish sub-section (4) of section 80P so that the deduction that was available before 2008-09 is restored.

NAFCB has also urged the FM to consider the inclusion of deposits with non-scheduled cooperative banks for eligibility to accept deposits enjoying deduction under section 80C of Income Tax Act, 1961. Such depositors will not only have a higher number of options but also find it easy to invest in those non-scheduled UCBs available in their neighbourhood or are having easy proximity.

The other demands of the NAFCB include:

1. All the existing micro and small enterprises who are customers of the UCBs be made eligible for emergency support extended to the enterprises under the Guaranteed Emergency Credit Line (GECL) or any other scheme announced by the government.
2. All UCBs should be included as prime lending institutions to avail subsidy under the Pradhan Mantri Awas Yojana
3. All UCBs should be included in the MUDRA scheme for providing finance to the entrepreneurs and to get refinance under the Scheme.
4. RBI has stopped issuing licences for establishing new urban cooperative banks in 2003 and it is almost two decades since any new urban cooperative bank has been established. A large number of districts in the country are devoid of any urban cooperative bank which affects the unorganised sector directly. There should be a clearly laid out policy for people to submit applications to promote localised urban cooperative banks and RBI should issue licences if they meet the criteria, in a time-bound manner, NAFCB stated.