Foreign banks' adv tax payments dip 58%

MUMBAI: Advance taxes paid by foreign banks operating in the country have declined by over 58% in the fourth quarter. The current fiscal year is the second in succession when foreign banks have paid lower taxes indicating that low loan demand, derivatives losses and low investment banking fees in the absence of deals have affected their profitability.

The March quarter advance tax paid by the eight major foreign banks — Stanchart, Citibank, HSBC, Deutsch Bank, Bank of America, Barclays, Bank of Nova Scotia and DBS — has come down to Rs 775.3 crore from the year ago outgo of Rs 1,874.18 crore.

Stanchart paid Rs 200 crore, Citibank — Rs 150 crore, HSBC — Rs 190, Deutsche Bank — Rs 60 crore, Bank of America — Rs 39 crore, Barclays — Rs 25, Calyon Bank — Rs 45.3, Bank of Nova Scotia — Rs 35 and DBS paid Rs 30 crore.

A source in the income-tax department said: “The profit before tax has come down sharply for these banks which were hit by the global economic crisis over 2008 and 2009. The main reason for the fall in profitability is lower loan growth, with the banks having become wary of taking risks and consequently very choosy in disbursing loans.”

Local banks, too, did not do too well. “While all the other sectors reported lower income last fiscal, the banking sector stood out by paying higher taxes,” said a senior IT official. “However, the tax outgo of Indian banks this year remained more or less flat, while the tax outgo of foreign banks declined sharply.”