Odisha wants cooperative banks to be exempted from income tax

The Odisha government has urged the Centre to exempt state and central cooperative banks from payment of income tax.

It is not fair to treat the cooperative banks at par with commercial banks or with urban cooperative banks, as these banks are actually cooperative societies whose core activity is to provide cheap credit to farmer members.

Therefore, it is requested that the state/central cooperative banks should be exempted from payment of income tax as was being allowed prior to the year 2006-07, the state government stated in a pre-Budget memorandum submitted to the Centre.

The state and central cooperative banks were allowed exemption from income tax under section 80P (2)(a)(I) of the Income Tax Act, 1961. However, the Finance Act, 2006, introduced Explanation 4 to this section, which took away the admissible deductions for the cooperative banks.

The state has suggested creation of a corpus fund of Rs 1,000 crore at the level of National Bank for Agriculture and Rural Development (Nabard).

The proposed corpus fund would provide financial assistance to the weak banks for a turnaround within a specific time-frame.

The government pointed out that availability of adequate resources for development of infrastructure and cooperative enterprises is critical to the furtherance of the cooperative movement and a cooperative development fund is required to be created to augment the capacities of the cooperatives.

The fund will also help provide incentive for formation and development of cooperatives for women, unemployed youth, landless labourers, artisans, scheduled castes and scheduled tribes.

Odisha has stressed on formulating a national programme for promotion of cooperative development.

On financial inclusion, the state government feels the Government of India needs to issue suitable directions to the commercial banks for opening brick and mortar branches in each of the 4,597 unbanked gram panchayats in the state by March 2019.

The State Level Bankers Committee (SLBC) has been sensitive to this issue and has decided to open a brick & mortar branch in each of the 4,597 unbanked gram panchayats of the state, he said.