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Bank Employees  Pay Income Tax on Loans Taken at Concessional Rate but Has Vadra Done the Same ?

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Rajesh Goyal 




The layers of the dealings between DLF and Robert Vadra have just started being peeled.    For how long this will continue is anybody's guess.   Had it been raised by any other political party or media, a lid must have been put on  it by this  time.   It is reported that it was done by  ET a few months back and the news died by next day.     However, this time it has been done by Arvind Kejriwal,  all Ministers are finding it difficult to shut the mouth of this new outfit as all agencies have already probed him thoroughly and these agencies find it extremely difficult to bring out new dirty material against them.  



I had raised the question earlier as to the role played by banks (CMDs, EDs and Board of Directors as such loans are sanctioned only at their level) in ignoring this blatant violation of the terms and conditions of sanction (by DLF)  which requires the borrowers to seek prior permission of the lenders if they decide to give loan to third party.  [  DLF Gives Interest Free Rs 65 crores  Loan to Robert Vadra's  company -  Did Lender Banks Permitted This ?- Caution for Bank officers  ]


Yesterday (7/10/2012), DLF has come out with some statement, which Kejriwal appears to have rightly told as half truth and full of lies.   I am sure this fight will continue  for some more time and new revelations will come out.  However, instead of going into political implications,  I would like to discuss here only issues from the bankers point of view   The questions which I am raising on this website has not been raised by any one, as far as I know, till date.


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I still remember, while in service, I had paid income tax on (a) the amount of interest paid on my PF balance beyond what was the interest allowed to central government employees; (b) on the difference in interest on my Housing Loan beyond the concessional rate of interest;  (c) the benefit assumed to be due to me on my Festival Loan as it was interest free.    The worst part of all the above is that the tax paid by me on higher interest earned on PF balance has not even be refunded although while giving 2nd Pension option, the same was taken back alongwith interest.   The whole purpose of all these was that no employee should get benefit in the shape of loans at concessional interest rates.   If he gets that, it must be taxed and tax recovered from the employee.    Do you  remember this or have forgotten all these?



Now it is reported that DLF has given Rs 65 crores as interest free loan to Vadra's companies.   Our Law Minister, our Finance Minister have been crying at their full voice that 'the transactions were between two business entities and anybody can give loan at free of interest or concessional rate of interest.  Lalu says that anybody can sell his property at any rate he desires.  First and foremost question is whether any listed company like DLF can do this legally.   What are the rights of investors if the company indulges in such malpractices.



I was now wondering what sins I and my fellow poor bankers have done that even if they get loan at concessional rate of interest for building a personal house to live, they are asked to pay tax on the concessional amount of interest.    If DLF gives interest free loan or at concessional rate, our FM and Law Minister say it is a  transaction between two business entities and  you should not question it.    It is a matter to be verified as to whether Vadra's company's have paid tax in the respective years for availing interest free / concessional rate of interest in the form of loan or so called business advance? If the advance was given at market rate, then what provisions for interest payable were made in the Balance Sheets of DLF and Vadera's companies.   Whether income tax payable was calculated and paid.  What was the role of income tax department in this issue.    If they have not paid tax on such concessional interest, then bank employees are also entitled to get the refund of the tax paid on such concessional rate of loans like Housing Loan etc.



I would like our readers to ponder on above issue and give feedback as to the rules prevalent in their respective banks for availing such loans at interest free or at concessional rate of interest.



Second question, which is relevant for bankers is the difference between "Loan" and "Business Advance" by a firm ?    I feel there is no difference but nature of advance is different.   At the time of sanction of loans, how each of these is treated?     What criteria  should a firm adopt before allowing business advances?   When banks give "business advance" (for us it is only another nomenclature for loan), to a merchant for his "credit card" sales, bankers obtain the sales through credit cards for last few years and only then it gives such advance after keeping a margin to 20 to 30%.    Can a business firm with a networth of Rs 50 lacs can be sanctioned "Business Advance" of Rs 65 crores if the same has business transactions of say only few lakhs rupees in previous years.     Bankers need to learn new lessons in analysing the Balance Sheets.   If you have any additional knowledge on above two issues,  please share on this page for the benefit of other readers.





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