PSU banks plan to give soft loans to newly TRPs

A few state-owned banks are functioning on a scheme to give soft loans to newly-minted tax return preparers (TRPs) for buying office equipment such as personal computers to help them start business in the current assessment year.

“The loan scheme would be normal commercial transactions with much easier terms,” said a finance ministry official. Details on loan costs were not available, but state-owned banks currently offer education loans of up to Rs5 lakh at interest rates between 11% and 11.5%. Banks started working on the loan scheme after industry body Indian Banks’ Association agreed to the finance ministry’s request to help TRPs, the official added.

TRPs will be unique as they will receive a financial incentive from the income-tax department to bring in new tax assesses, this is the first time in the department’s history that outsiders will be paid for widening the tax base.

At present, 3,545 people have qualified as TRPs. As many as 1,254 people who have got TRP training, but were not able to clear the final test in the first around, will get another chance for the test soon, the official said.

The training program for TRPs was completely funded by the government, which held a qualifying exam last year to shortlist people for the training. The income-tax department will formulate a strategy to constantly monitor the quality of work done by TRPs.

Work on the TRP scheme started sincerely after finance minister P. Chidambaram, during his Budget 2006 speech, said it would be introduced.

Generally individual taxpayers take help form Chartered accountants (CAs) to file their income-tax returns if they choose not to do it on their own.

But the Institute of Chartered Accountants of India (ICAI) is not happy with the TRP scheme. It has requested the income-tax department to take a re look at the scheme. Ved Jain, the institute’s vice-president said that ICAI feels that only CAs are capable and have requisite skills to handle tax returns. TRPs, unlike CAs, can not be allowed to take up statutory audits such as the ones that are needed to be filed by companies. In addition, the income-tax department has restricted TRPs’ probable client base and limited the fees they can charge.

A TRP will not be able to file the return of anyone with an annual taxable income above Rs3,00,000 and their fee has been capped at Rs250. The government, however, has tried to encourage TRPs to widen the tax base by giving incentives that exceed Rs250 in the event they file returns on behalf of a first-time assesses. Every addition to the tax base of about 3.27 crore assesses (end-March, 2006) through a TRP will result in an incentive of 3% of the tax return, subject to a ceiling of Rs1,000.

Once a new assesses files a return for the first time, he/she is likely to continue filing returns annually. This will help the income-tax department write off the relatively high initial expenses over a long period and keep the tax collection costs in line with the average.

Last year the finance minister said the cost of tax collection in India is 0.67% of the total tax collected, it is lowest in the world.