Utkarsh Small Finance Bank Faces Potential Rs 52 Crore Additional Income Tax After Plea Rejection

Utkarsh Small Finance Bank might need to pay an extra Rs 52 crore in income tax for the financial year 2022-23. The income tax department declined the bank’s request for a lower tax rate, leading to a disputed demand.

The bank initially chose a reduced tax rate applicable to domestic companies and filed an income return with a refund claim of Rs 2.3 crore. However, for the assessment year 2023-24, the Income Tax department, in a communication from the DC/ACIT of Income Tax, CPC, Varanasi, rejected the claim and calculated the tax liability based on the standard tax rate, resulting in the disputed demand.

In response, the bank stated in a regulatory filing that it plans to appeal against the decision and explore other legal options to contest the demand and have it removed. Utkarsh Small Finance Bank had been applying for concessional tax rates since the assessment year 2020-21, and it had received this benefit for earlier assessment years. The bank received a communication rejecting its rectification application against the demand of Rs 52 crore.