Debit tax was introduced with the enactment of Debit Tax Act No. 16 of 2002 effective on 1 st of June, 2002. This was amended in 2003 and in 2007. The debit tax shall be levied at the rate of 0.1% on the total liable debits made during each calendar month from any current account maintained at a Commercial Bank or a Specialized Bank or from each savings account maintained at a Commercial Bank, a Specialized Bank or Finance Companies. This is applicable on debits which exceeds Rs. 20,000/- per month.
Subject to the provisions of section 13, there shall be charged and levied:
- The total amount of the debits made during each calendar month against each current account maintained at a commercial bank
- An amount realized by the encashment of a certificate of deposit or travelers cheque, a tax to be called a debits tax, at the rate of one tenth of one per centum of the amount of the total debit or the amount encashed, as the case may be.
The debits tax imposed under section 2 shall:
- In the case of a debit from a current account maintained at a commercial bank, be paid by the person or persons in whose name or names that account is maintained
- In the case of an amount realized by the encashment of a certificate of deposit, be paid by the holder of the certificate and
- In the case of an amount realized by the encashment of a travelers cheque, be paid by the person presenting the travelers cheque for encashment.
The liability of a person to pay the debits tax shall:
- In the case of a debit from a current account maintained at a commercial bank, commence at the end of the month in which the debit was made
- In the case of an amount realized by the encashment of a certificate of deposit or travelers cheque, Commence immediately upon such encashment.
Every commercial bank, specialized bank, finance company or authorized dealer shall be liable to collect the debits tax arising out of current account transactions, encashment of certificates of deposit and travelers cheques and remit the same in accordance with the provisions of this Act.
Every commercial bank shall, at the beginning of every month, withdraw from every current account maintained at that bank, a sum equal to the sum payable as debits tax from that account in the preceding month, and shall remit such sum to the Commissioner - General, on or before the last working day of each month.
Provided that, if the beginning of any month falls on a non-working day, such withdrawal may be made on the first working day thereafter. Provided further that, debits tax should not be withdrawn from a current account if the tax liability of a current account during a particular month is less than rupees ten.
Last Updated on: 19-05-2010