Interest Tax Act Revival: UCBs Must Deposit Excess Collections to Trust
No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2008-09/188 · issued 22 Sep 2008 · ~2 min read
Quick answerRBI directs Urban Co-operative Banks to deposit excess interest tax collected via rounding off to a Supreme Court-mandated Trust Fund. Banks that collected such excess must also consider contributing Rs 50 lakh to the fund. Compliance must be reported to the respective RBI Regional Office.
What changed
The Supreme Court, on April 16, 2004, ordered that excess interest collected by banks through rounding off the applicable interest rate must be recovered and credited to a Trust for disadvantaged people. Each concerned bank must also contribute Rs 50 lakh to this Trust. RBI now advises UCBs to deposit any such excess amounts into the Trust's SBI account and report compliance.
What it means for you
UCBs that have been rounding off interest tax to the next higher 0.25% and collecting excess from borrowers must now refund that excess to a government-mandated Trust. This creates a financial liability for affected banks, including a potential Rs 50 lakh contribution. Banks need to identify any such excess collections and ensure timely deposit to avoid regulatory action.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Identify if your bank has collected excess interest tax from borrowers through rounding off to the next higher 0.25%.
Deposit any such excess amount into the Trust's Savings Bank Account No. 65012067356 with State Bank of Patiala, Shastri Bhavan Branch, New Delhi.
Decide on the Rs 50 lakh contribution to the Trust based on your bank's specific facts and circumstances.
Report compliance to the respective Regional Office of the Reserve Bank of India.
Who it affects
All Primary (Urban) Co-operative Banks, Borrowers of UCBs who were charged excess interest tax via rounding off
❓ Common questions
Regulatory timeline
Decoded by BankPulse2026-06-19 12:24 IST
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Status change: withdrawn05 Aug 2026, 04:00 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What is the Trust Fund mentioned in the circular?
The Trust Fund is created as per the Supreme Court's April 16, 2004 order, for the benefit of disadvantaged people. The Ministry of Social Justice and Empowerment operates a Savings Bank Account for this Trust at State Bank of Patiala, Shastri Bhavan Branch, New Delhi.
Is the Rs 50 lakh contribution mandatory for all UCBs?
No, the circular states that it is for each concerned UCB to decide on the Rs 50 lakh contribution based on the facts and circumstances of its case. Only banks that collected excess amounts are liable to deposit the excess, but the contribution decision is left to the bank.
What should we do if we have not collected any excess interest tax?
If your bank has not realised any excess amount from borrowers through rounding off, you may not need to deposit anything. However, you should still review your records and report compliance to the respective RBI Regional Office as advised.
📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Repealed byRBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
RBI’s words: “Official withdrawal register entry #2101: UBD.BPD(PCB)CirNo:18/13.04.00/2008-09 — "Revival of the Interest - Tax Act 1974 - Collection from Borrowers" dated September 22, 2008”
📜 Read the original circular — full text as issued by RBI
RBI/2008-09/188
UBD.BPD (PCB) Cir No: 18 /13.04.00/2008-09
September 22, 2008
Chief Executive Officers of
All Primary (Urban) Co-operative Banks
Dear Sir
Revival of the Interest –tax Act 1974-Collection from borrowers
Please refer to our circulars UBD (PCB)17/DC.(V.1).91/92 dated September 04, 1991 and UBD.No.PCB.CIR.5/13.04.00/97-98 dated August 11, 1997 on the above subject.
2. The Hon'ble Supreme Court in its judgement dated April 16, 2004 has ordered that excess interest collected by the banks from the borrowers through rounding off the applicable interest rate should be recovered from the banks and be credited to a Trust to be created for the benefit of disadvantaged people. The Hon'ble Court had also directed that each concerned bank shall contribute to the extent of Rs.50 lakh to the said Fund. (Relevant extracts of Order of Supreme Court dated April 16, 2004 in Civil Appeal No. 4655 of 2004 and copy each of Government letters dated January 10, 2006, November 24, 2006 and February 5, 2008 in this regard are enclosed).
3. Accordingly, UCBs are advised that excess amount realised, if any, from their borrowers towards interest tax by way of rounding off, may be deposited with the above referred Trust Fund. The Ministry of Social Justice and Empowerment has opened Saving Bank Account No. 65012067356 with the State Bank of Patiala, Shastri Bhavan Branch, New Delhi in the name of the Trust. UCBs, which have realised excess amount from the borrowers, towards interest tax by way of rounding off to the next higher 0.25%, are liable to deposit the said amount to the Trust Fund.
4. As regards contribution to the extent of Rs.50 lakh to the trust fund, it is for the UCBs concerned, which have collected excess amount, to decide depending upon the facts and circumstances of the case.
5. UCBs are advised to report their compliance to the respective Regional Office of Reserve Bank.
( A.K. Khound )
Chief General Manager-in-Charge.
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2008-09/188 · issued 22 Sep 2008. The plain-English explanation above is BankPulse’s own independent summary.
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BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=4490&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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