Scheduled Banks Statement Oct 2026: Income Tax Impact for Depositors

What Happened?

The Reserve Bank of India has released the latest Statement of Position of Scheduled Banks as on October 31, 2026. This official document reveals the financial position of 120 scheduled commercial banks, 26 state cooperative banks, and 55 primary urban cooperative banks operating in India. The data shows significant growth in deposit liabilities, with total deposits (other than from banks) reaching ₹28,816.08 crore across all scheduled banks, representing a substantial increase from ₹24,679.73 crore as on October 31, 2025.

Key highlights include demand deposits rising to ₹3,538.96 crore and time deposits reaching ₹25,277.12 crore. Bank credit (excluding inter-bank advances) has grown to ₹23,703.23 crore. Food credit outstanding from scheduled commercial banks surged to ₹123,266.71 crore as of October 31, 2026, compared to ₹70,371.31 crore in the previous year.

Background & Legal Context

This RBI statement is published under the Reserve Bank of India Act, 1934, and provides aggregated banking system data affecting income tax compliance for Assessment Year 2026-27. While the statement itself is regulatory, it directly impacts several provisions under the Income Tax Act, 2025.

Relevant Sections of Income Tax Act, 2025:

• Section 194A – TDS on Interest on Deposits: Banks must deduct TDS at prescribed rates on interest paid to individuals and Hindu undivided families (HUFs) on savings and fixed deposits. The growth in deposit liabilities means higher interest payments, triggering more TDS obligations.
• Section 194LA – TDS on Interest on Non-Resident External (NRE) Deposits: For deposits held by non-residents, TDS provisions apply at different rates under this section.
• Section 139 – Filing of Income Tax Returns: Depositors must report interest income received from banks in their ITRs. The RBI data indicates increased deposit volumes, meaning more individuals will have interest income to disclose.
• Section 285 – Relief for Dividend Income: Applicable to cooperative bank dividend distributions, which form part of this banking system data.
• Section 44 – Presumptive Income: For business taxpayers maintaining deposits, reconciliation with bank statements is mandatory.

Additionally, the old Income Tax Act, 1961 provisions continue to apply in transition until fully superseded by the 2025 Act for specific assessments.

Banking Regulation Impact: This statement follows RBI guidelines on Liquidity Adjustment Facility (LAF) transactions, which are now reflected under 'Borrowings from RBI' (as per Malegam Committee recommendations effective July 11, 2014). This affects the financial statements banks file with tax authorities, influencing corporate tax audits and transfer pricing documentation.

What Does This Mean for You?

For Individual Depositors:

• TDS on Bank Interest: With total deposits at ₹28,816.08 crore and rising time deposits, banks will credit more interest. If your annual interest income exceeds ₹40,000 (for individuals below 60 years) or ₹50,000 (for senior citizens), TDS at 10% will be deducted. You must account for this in your income tax return filing for AY 2026-27.
• Interest Income Disclosure: Every rupee of interest earned must be reported under 'Income from Other Sources' in your ITR. The RBI data reflects increased deposit mobilization, suggesting your bank likely credited more interest in FY 2025-26 than previous years.
• Form 26AS Reconciliation: By January 31, 2027, your bank will file quarterly TDS statements with the income tax department. Ensure your Form 26AS matches deposit statements. Mismatches can trigger tax notices.

For Banks and Financial Institutions:

• Increased Compliance Burden: With ₹28.8 lakh crore in deposits and growing credit portfolio (₹23.7 lakh crore), banks must ensure robust TDS mechanisms to comply with Section 194A. Non-compliance invites penalties up to 200% of TDS deficiency plus interest at 12% per annum.
• Interest Calculation & Documentation: Banks must maintain clear records of interest computation and TDS deduction for each depositor. This documentation is critical for tax audits under Section 44AB and 225 (old 1961 Act provisions still relevant during transition).
• Cooperative Bank Compliance: The inclusion of 26 scheduled state cooperative banks and 55 primary urban cooperative banks in this statement means they must follow identical TDS and interest income reporting norms.
• NRE Deposit Reporting: Foreign exchange management and income tax reporting for non-resident deposits requires accurate reporting under Section 194LA and FEMA regulations.

For Borrowers:

• Bank credit growth to ₹23.7 lakh crore indicates increased lending. If you availed loans, interest deduction under Section 37(1) (for business) or Section 24(1) (for housing) must be claimed with proper documentation, supported by bank statements matching RBI reported figures.
• Food credit surge to ₹123,266.71 crore affects agricultural income computation under Section 230(1) of the Income Tax Act, 2025, particularly for farmers and food-related businesses.

For Tax Authorities: This RBI statement serves as a cross-verification tool. IT department cross-checks individual ITRs against aggregated banking data. If reported income doesn't match banking system flows, scrutiny assessments are initiated.

What Should You Do Now?

Immediate Actions (November-December 2026):

• Review Your Bank Statements: Collect all deposit statements from October 2025 to October 2026. Note total principal, interest credited, and TDS deducted for each account across all banks.
• Verify TDS Certificate (Form 16A): Request your bank to issue consolidated Form 16A showing TDS deducted on deposits. Cross-check against your deposit statements. Discrepancies must be resolved before ITR filing (by July 31, 2027 for AY 2026-27).
• Track Multiple Deposits: If you hold deposits across different banks to bypass the ₹40,000 TDS threshold in each, compile total interest income. Even if each bank doesn't deduct TDS, you must report total interest in ITR and pay tax accordingly.
• Maintain Interest Computation Records: Keep detailed records of interest earned month-by-month. This helps during tax audit or if IT department raises queries.
• For Cooperative Bank Deposits: Ensure clarity on whether cooperative bank deposits fall under Section 194A (they do). Some taxpayers mistakenly believe cooperative deposits are exempt from TDS.

For ITR Filing (May-July 2027 for AY 2026-27):

• Report total interest income from all banks under 'Income from Other Sources' in ITR-1 or ITR-2.
• Attach schedules showing deposit-wise interest and TDS. Ensure reconciliation with Form 26AS.
• If TDS not deducted despite exceeding ₹40,000 threshold, file request to bank citing Form 15G/15H non-eligibility. Pay self-assessed tax in advance to avoid interest under Section 220.

For Borrowers:

• Maintain correspondence from lenders confirming interest component of EMI payments. Reconcile with Schedule of Bank Credit (₹23.7 lakh crore) to substantiate loan deductions.

Key Takeaways

• Deposit volumes are up 16.8% year-on-year: ₹28,816.08 crore as of Oct 31, 2026, increasing interest income obligations for millions of depositors in AY 2026-27.
• TDS compliance is non-negotiable: Every depositor earning interest above ₹40,000 (individuals) must ensure TDS is deducted and properly reported. Non-compliance triggers penalties under Section 271H of Income Tax Act, 2025.
• Form 26AS reconciliation is critical: Mismatches between TDS certificates and ITR claims invite notices. Cross-verify before filing returns.
• Food credit spike (₹123,266.71 crore) signals agricultural lending growth: Farmers and agricultural businesses must report farm income correctly and reconcile with bank borrowings under Section 230(1).
• RBI statement is a tax audit tool: The department uses aggregated banking data to identify tax evasion. Individual deposit and income patterns are increasingly monitored through cross-verification.

Bottom Line: This October 2026 RBI statement reflects a growing deposit base and credit expansion across Indian banking. For tax purposes, depositors must ensure meticulous TDS tracking and interest disclosure in AY 2026-27 ITRs. Banks must strengthen compliance infrastructure. Any mismatch between RBI reported figures and ITR claims invites tax scrutiny.

Need expert help with this? EaseValue CAs in Jaipur — WhatsApp 63677 44602