Multiple bank account holders under scanner, govt likely to put cap on number of accounts via legislation

New Delhi: Service providers who have multiple undisclosed accounts at different banks are under the scrutiny of the tax authorities as the government believes they are used as a tool for tax evasion in certain cases.

Although there is no law that restricts anyone from opening multiple bank accounts, the government plans to find clients for the shell company operatives, which is said to use fake checking accounts to launder money. The discussion within the government over a recent case in Ghaziabad in Uttar Pradesh where a person with 87 accounts was found at the Eastern Bank of Trade and Access. He is suspected of having laundered more than Rs 380 million in these accounts.

According to sources, the preliminary discussion within the government indicates that entrepreneurs can be excluded in manufacturing, processing, and other industrial processes because they carry out many daily transactions. However, for professionals, a simple rule describing the exact number and nature of accounts is likely to be implemented soon. It has been argued that since the financial operations of professionals are limited, regulation of numbers such as the bank account ceiling can be entered through legislation.

Official notes verified by Firstpost indicate that many bank accounts opened in the same city or in different parts of the country are being used by some unscrupulous elements to publish income receipts and open accounts under false names for illegal activities.

Legislation covering all businessmen and professionals identified as service providers will have a greater responsibility in transactions since it will be mandatory to disclose all bank accounts through which receipts and payments are made. Businessmen will be asked to disclose all accounts in case they borrow money from one bank and deposit the collection in another bank.

"Each bank branch is expected to provide account details with tax authorities, including goods and services tax (GST) officials so that database of accounts opened in different parts of the country by any particular person can be verified. If there are any discrepancies, the further probe can be initiated by the authorities concerned,” the notes suggested.

The sources said that during the practice of verifying the rightful account holders if some accounts are found to be anonymous, the bank can freeze them and prevent any financial transactions until the identity of the account holder is verified. The memorandum establishes that for the effective implementation of a new set of rules, there must be adequate coordination between the Income Tax Department and the banks.

" The inconsistencies related to suspicious accounts will be resolved by concerned bank officials," it said.

The Reserve Bank of India (RBI) orders banks to warn against opening new checking accounts to verify non-performing assets (NPA). The Reserve Bank of India said that banks, when opening checking accounts, should insist on a statement indicating that the account holder does not have any credit facility with any other bank.

In addition, the official in question must ensure that its branches do not open current accounts to entities that have credit facilities from the banking system without obtaining a no-objection certificate (NOC) from the lending banks.

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