CAG flags tax irregularities by banks, NBFCs

New Delhi, Apr 3, 2026

Synopsis
The audit identified 1,847 observations, including 671 systemic issues and 533 compliance lapses. The largest discrepancies related to improper deductions for bad debts, provisions for doubtful loans and transfers to special reserves.

The Comptroller and Auditor General (CAG) flagged widespread irregularities in tax exemptions and deductions claimed by banks and non-banking financial companies (NBFCs), with a potential revenue impact of ₹74,766 crore, according to a report tabled in Parliament on Thursday.

The report, based on a sample of 2,378 cases examined till June 2023 by the CAG, reviewed the Income Tax Department's handling of deductions and exemptions, and found systemic weaknesses, compliance failures and gaps in oversight across the sector. The CAG called for alignment between tax rules and central bank guidelines, and highlighted the need to address gaps in provisions governing NBFC taxation.

The audit identified 1,847 observations, including 671 systemic issues and 533 compliance lapses. The largest discrepancies related to improper deductions for bad debts, provisions for doubtful loans and transfers to special reserves.

[The Economic Times]