Currency Trap: IT Dept moves in on cooperative banks

With bank withdrawals restricted, the Income Tax Department seems to be taking the opportunity to move in on a long-time target of tax evasion investigators — co-operative banks.

Several co-operative banks in Kerala have got Income Tax Department notices seeking details of deposits. It is not known if banks in other states have also got similar notices.

Unlike mainstream banks, co-operative banks — mostly controlled by local politicians — have lax KYC requirements and often don’t ask for tax-related details such as PAN cards.

This has led to these banks being used as safe havens for black money.

However, the current ‘currency crisis’ is being utilized by the Income Tax department as a unique opportunity to trap those who have kept their undeclared money here.

Since co-operative banks have not been provided new currency notes, their depositors cannot withdraw their cash. In other words, these depositors are trapped.

Co-operative banks have to go to regular banks to exchange their funds, or wait for those who they have lent it to to pay back in the new currency, which will take months.

It is estimated that the total deposits in the Cooperative sector in Kerala is 90,000 cr, and out of this, one third, or about 30,000 cr is income on which no tax has been paid.

The IT departments have given one month’s time for the apex cooperative banks in Kerala to come up with detailed break-up of their deposits.