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Banks and financial institutions may get tax benefits on profits made through activities leading to financial inclusion.
Further, any losses these institutions incur, as a result, may also be allowed to be carried over for a longer period.
At present under Section 72 of the Income Tax Act, 1961, losses from any non-speculative business activity are allowed to be carried over for up to eight subsequent assessment years.
A senior Government official told Business Line , “A proposal to this effect is being actively considered by the Department of Revenue.”
However, another senior official said, “This is not an easy task as segregating income from the financial inclusion is not easy”.
On behalf of the sub-committee on financial inclusion of the Prime Minister's Council for Trade and Industry, the CEO of ICICI Bank, Ms Chanda Kochhar, made a presentation before the Prime Minister, senior Cabinet Ministers and other members of trade and industry councils on March 31. This sub-committee also includes Mr Sunil Bharti Mittal, Chairman, Bharti Entreprises, among others.
Banks say that at a time when profit margins are under pressure, tax breaks or carrying over losses for a longer period would be a big booster for incurring new expenditure, especially in areas where earnings are very low.
Financial inclusion talks about expanding banking services in un-banked areas and opening no-frills accounts, among others.
Key recommendations
The sub-committee made 13 key recommendations.
An Action Taken Report prepared by the Government said some of these have already been fulfilled. For example, the sub-committee suggested permitting ‘for profit' entities to act as Business Correspondents. Barring NBFCs and microfinance institutions, all ‘for profit' organisations have been allowed by the RBI to act as Business Correspondents.
Another recommendation is about sharing common infrastructure to leverage benefits of economies of scale. Here, the Government said that two pilot projects are being implemented in Bulandshahar, Uttar Pradesh (Punjab National Bank) and Mewat, Haryana (Syndicate Bank).
The recommendations also include allowing basic but essential services such as low-value remittances by non-banking players. While nothing has been said about non-banking players, the Action Taken Report said out of the 46 mobile banking licences issued, 33 have already commenced operations.
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