The government is set for double deduction at source from interests on bank deposits of companies from the next fiscal year (2022-23) to prevent tax evasion and ensure it does not go unreported during returns submission.
The new budget for FY23 is likely to propose raising the rate of source tax to 20% from the existing 10% from interests on savings deposits, fixed deposits or any term deposits maintained by company taxpayers with any banks or non-bank financial institutions interest, according to sources at the finance ministry.
The deduction will remain at 10% for individual depositors and public universities or educational institutions whose teachers are enlisted for monthly pay order, while the current 5% source tax will continue to be levied on recognized provident fund, approved gratuity fund, approved superannuation fund or pension fund, ministry officials said.
The companies, which are enjoying tax exemption, will remain out of the purview of the source tax.
The source tax cut will not apply to any deposit pension scheme sponsored by the government or by a bank with prior approval of the government.
If any person or a company fails to furnish proof of income tax return submission, the rate of deduction will be 50% higher, they added.