DGBA.GAD.(MC) No.H-1074/31.12.010/2003-2004, Dt. 16/04/2004
Master Circular on Turnover Commission
The Reserve Bank of India has been issuing various instructions on Turnover Commission from time to time. In order to enable the Agency banks to have all the currently operative instructions on the subject at one place, a Master Circular has been prepared which is enclosed.
2. Please acknowledge the receipt of this Master Circular.
Yours sincerely,
(R.C. Das)
General Manager
Encl : As above
Turnover Commission1. Introduction
Reserve Bank of India acts as a banker to the Central and State Governments in terms of the provisions of Sections 20, 21, and 21 A of the Reserve Bank of India Act, 1934. The Reserve Bank carries out the general banking business of the Government through its own Offices and branches of Agency banks. Reserve Bank has entered into agreements with the agency banks outlining interalia the terms and conditions for undertaking Government business as agents of the Reserve Bank. In consideration of performance of general banking business of the Central and State Governments on behalf of the Reserve Bank of India, the Reserve Bank is paying commission to the agency banks on the basis of the cost to the agency banks for performing the said functions. The commission is revised every five years and is known as Turnover Commission. Various instructions are issued in this regard from time to time.
1. Expert Technical Group was set up to suggest appropriate methodology for determining the cost of conducting Government business and in its report the Group suggested simplified returns to compile cost data from the agency banks. The agency banks were required to submit cost data in revised returns CGBR I to III.
CGBR-I : This Return seeks general information of the agency banks conducting Government business at the branch level and in particular, the nature of Government business handled by the branch such as Central/State Government, Revenue/Expenditure, Pensions and level of computerization, etc.
CGBR-II : This Return embodies information both on account of volume of turnover in monetary terms and also in terms of number of vouchers, for a period of three financial years, segmented according to Government work, bank’s own work, currency chest and miscellaneous schemes. This also takes note of the role of the branch as distinct from Focal Point branch.
CGBR-III :This Return seeks to elicit staff cost and other establishment/overhead costs including annual maintenance cost of computer hardware/software, insurance, depreciation etc.
(Ref. DGBA.GAD.No. 1023/31.12.011/2001-02 dated June 11, 2002)
Deduction of TDS on TOC
1. As required under the provisions of Section 194H of the Income Tax Act, 1961, Reserve Bank had effected TDS on the amount of Turnover Commission paid to the agency banks for the financial year 2002-2003 and took up the issue with CBDT on the ground that irrespective of whether TDS was made or not by the Bank, Turnover Commission could be taxable in the hands of the banks concerned as it is part of the banks income
(Ref. DGBA.GAD.No. 347/31.12.010/2002-03dated January 31, 2003)
2. Accordingly CBDT decided that tax would not be required to be deducted by Reserve Bank on the amount of Turnover Commission paid or credited by it. However, it was reiterated that Turnover Commission would be taxable in the hands of the banks concerned as it is a part of the bank’s income.
(Ref. DGBA.GAD.No.H-190/31.12.010/2003-04 dated September 14, 2003)
In case any clarification is required, a reference may be made to the original circular.
Appendix
A List of Circulars consolidated in the Master Circular
| S No. | Circular No. | Date | Subject | Para No. |
| 1 | DGBA.GAD.No.1023/31.12.011/2001-02 | 11-06-2002 | Cost of conducting Government. business - TOC –Revision | 2.1 |
| 2 | DGBA.GAD.No.347 /31.12.010/2002-03 | 31-01-2003 | Deduction of Tax at source (TDS) on TOC-Section 194H of Income Tax Act, 1961 | 2.2 |
| 3 | DGBA.GAD.No.H190/31.12.010/2003-04 | 14-09-2003 | TDS on TOC will not be effected by RBI | 2.3 |
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