21 January 2011

Do Indian Banks care if you are an honest Income Tax Payer?

There is a lot of noise these days about the amount of money stashed away in Swiss Banks, and how immoral the Swiss Banking system is. It may be safe to assume that all the Indian money that is changing colours in the Swiss Banks is probably increasing for honest reasons as well-interest gained on parked money. I maybe wrong for I am neither an investment banker nor a financial expert. But still, such an assumption appears intuitive.

How well the Swiss banks look after your money! Whatever the method of your wealth accumulation!

Now compare it with the Indian Banks. I am an Indian. The company that I work with required that I submit proof of my savings for getting some income tax rebate by January 5th. Fair enough. I scrimped and scavenged and put some money into a 5 year term deposit into an Indian Bank. Of course, the number of zeros in this amount doesn’t in any way compare with the numbers in the Swiss banks. But parking money is parking money, and such parking is required by Indian law - if you want some rebate on your Income tax, that is. I did.

After I put my money, the rate of interest on deposits went North. It went up well enough for me to get worried and scurry to the Bank. I wanted to redeem my deposit and put the money in a fresh term deposit. I figured I could plead with my company to accept the new savings proof. After all, we are still in the same Indian financial year; in fact we have another two months for the current financial year to end. Also, I figured that whatever penalty I had to shell out owing to premature redeeming would be more than made up by the increased interest rates.

It turns out that the answer to question raised in the title of this article is a resounding No! That’s what I learnt when I went to redeem my term deposit. “You cannot redeem a term deposit that you have specifically pledged for tax savings,” said the bank officials. No arguments there, rule is rule.

The least you would expect the Indian banks to do is to protect the measly gains of an honest tax payer. Here, I did a 5 year term deposit as required by statute but was robbed of its benefits because our banks do not care for tax payers’ money. Well rule is rule.

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