The Reserve Bank of India in consultation with the ICAI appoints qualified Chartered Accountants as Statutory Auditors of the banks. The auditor appointed as statutory auditor of a bank branch shall conduct the audit at the end of the financial year i.e.as of 31st March of the relevant year. Nowadays, the bank branches are working in a fully automized atmosphere, therefore, auditors are required to verify the parameters set in the system, the logic of programming, etc. Since Income Tax rules are subject to frequent changes, unauthorized change or input of wrong parameters may lead to wrong calculation of income or expenses such as short debit of interest/ commission on advances and excess credit of interest on deposits. Whenever discrepancies are noticed by the auditor, he has to determine whether the discrepancies noticed are intentional or by error. More so auditor has to check whether the recurrence of such discrepancies is general or in respect of specific clients. Therefore, the auditors should concentrate more on the master data entered and validated at the branch and verify the compliance as per the latest tax regulations.
The statutory auditor of the bank shall check all the tax-related items and compliance of income tax rules. The key elements to be checked by the auditor are as under.
- It is obligatory on banks to deduct tax at an appropriate rate from interest paid on deposit, payment of rent, payments made to professionals and contractors, etc. Thus, auditor has to verify that during all the transactions and payments, the appropriate tax as per the guidelines is applied or not.
- All the tax payments made monthly/quarterly/half yearly or annually should be on time and all the challans are there in respect of each payment and tax returns are filed on time.
- TDS certificate should be issued without fail for the tax deducted by the bank for all the payments.
- Form 15 H or 15G should be timely collected from the customers/professionals or contractors, for not deducting tax if their income is below the maximum amount not chargeable to tax and they request the bank not to deduct TDS from the payments made.
- Forms 15G and 15 H received from the customers to be uploaded on the income tax department website on the a quarterly basis.The payer shall quote ‘sequence number’ (Field ‘a’ of UIN) in quarterly TDS statement against the transaction covered under Form 15G and Form 15H even though no TDS has been deducted. Form 15G and Form 15H should be retained by the branch for a period of 7 years.