CII Recommends Bank-Like Tax Benefits for NBFCs

Industry body CII (Confederation of Indian Industry) has pitched for giving NBFCs (Non-Banking Financial Companies) bank-like tax benefits in its pre-Budget memorandum to the Ministry of Finance.

In its memorandum, CII has asked ministry to give NBFCs benefits like tax deductibility of provisions for bad and doubtful debts, extension of special provision prescribing treatment of bad or doubtful debts, and exemption on Tax Deduction at Source (TDS).

"The NBFC sector needs to be provided adequate policy support in the Budget to help meet the financing needs of the economy and also to achieve the financial inclusion agenda," said Chandrajit Banerjee, director general, CII.

"Parity on taxation for the NBFC sector with banks would create a level playing field and promote balanced development of the Indian financial sector," Mr Banerjee added.

Though NBFCs are regulated by RBI like all other banks and financial Institutions, they are not given specific deduction on account of provisions for bad and doubtful debts, as per the provisions of Section 36(1) (viia) of IT Act, 1961.

CII has recommended that NBFCs should be allowed specific deduction to the tune of 7.5 per cent of its gross total income on account of bad and doubtful debts.

The industry body has also asked that the existing provisions of Section 43D of the IT Act should be made applicable to NBFCs, since there main business comprises of giving loans and advances like banks and PFIs (participating financial institutions).

It has also said that since NBFCs are supplementing the banks and these are also regulated by the RBI, NBFCs should be treated at par with banks and the benefit of 'Nil TDS' should be extended to them as well under Section 194A.