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Interest Tax Act 1974: UCBs Must Act on Supreme Court Order

No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2013-14/579 · issued 05 May 2014 · ~2 min read
Quick answerRBI directs all Urban Co-operative Banks to comply with a Supreme Court order on Interest Tax Act 1974 collections. Transferee banks of merged credit institutions (1991-1997) must contribute ₹50 lakh each and deposit excess rounded-off interest tax to the Trust Fund.

What changed

RBI issued a circular on May 5, 2014, referencing a Supreme Court order from February 21, 2014. This order clarifies that credit institutions merged between October 1991 and March 1997, whose transferee banks were liable post-merger, must now contribute ₹50 lakh each and deposit excess interest tax collected via rounding off. This updates the earlier 2008 circular on the same subject.

What it means for you

Urban Co-operative Banks that are transferees of merged credit institutions from the 1991-1997 period must now set aside ₹50 lakh per institution and remit any excess interest tax collected through rounding off. This creates a financial obligation for affected UCBs, requiring immediate compliance and reporting to RBI regional offices.

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

Who it affects

All Primary (Urban) Co-operative Banks, Transferee banks of merged credit institutions (1991-1997), Banks that collected interest tax via rounding off on loans and advances

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

What is the ₹50 lakh contribution for?

The Supreme Court order mandates that transferee banks of credit institutions merged between October 1991 and March 1997 must contribute ₹50 lakh each to the Trust Fund, as part of settling interest tax liabilities.

Does this apply to all UCBs or only those involved in mergers?

It applies to all UCBs that are transferee banks of credit institutions merged during the specified period (October 1991 to March 1997). Other UCBs not involved in such mergers are not directly affected.

What is the deadline for compliance?

The circular does not specify a deadline, but advises immediate action. Banks must report status to the concerned Regional Office of RBI as soon as possible.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Repealed by RBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
RBI’s words: “Official withdrawal register entry #927: UBD.BPD.(PCB).Cir.No.56/13.04.00/2013-14 — "Interest Tax Act 1974 - Collection from Borrowers" dated May 5, 2014”
📜 Read the original circular — full text as issued by RBI
RBI/2013-14/579 UBD.BPD (PCB) Cir No.56/13.04.00/2013-14 May 5, 2014 The Chief Executive Officers of All Primary (Urban) Co-operative Banks Dear Sir, Interest Tax Act 1974 – Collection from borrowers Please refer to our circular UBD.BPD (PCB) Cir No.18/13.04.00/2008-09 dated September 22, 2008 on the captioned subject. 2. It is observed from the Supreme Court Order dated February 21, 2014 in Writ Petition (Civil) No.301 of 2005 that credit institutions which were in existence between October 1991 and March 1997 but were merged with another bank /financial institution prior to the date of the Supreme Court Order in April 2004 or merged subsequently, the transferee banks are liable to contribute to the extent of ` 50 lakh each as also deposit the excess amount collected by way of rounding off the interest tax on the interest income on loans and advances by the transferor banks, to the Trust Fund. 3. In view of the Supreme Court Order dated February 21, 2014, all UCBs are advised to take suitable action in accordance with the Order of the Supreme Court and report status to the concerned Regional Office of RBI. Yours faithfully, (P.K. Arora) General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/579 · issued 05 May 2014. The plain-English explanation above is BankPulse’s own independent summary.
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BankPulse Compliance Evidence Pack — generated 03 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=8860&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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