In a new development in the ongoing crisis of India’s Kingfisher Airlines, an Indian finance official has confirmed that Kingfisher has not been depositing the payroll taxes that it has been witholding from employee paychecks for the last 2 years.

If you missed my earlier post regarding Kingfisher’s challenges, you can read that post here

Here is the release as published by Reuters:

Cash-strapped Indian carrier Kingfisher Airlines has not deposited with the government most of the income tax it deducted from its employees’ salaries for the last two fiscal years, junior finance minister told parliament on Tuesday.

Kingfisher has about INR1.3 billion rupees (USD$24.6 million) of tax deducted at source (TDS) to be deposited with the government and has committed to pay it by the end of the current financial year to March 2012, S.S. Palanimanickam told parliament in a written reply.

“Survey has been conducted in case of Kingfisher Airlines, which revealed that the airline had not adhered to TDS provisions,” the minister said.

The government has initiated proceedings to recover the default amount, levy interest on delayed payment, and take further statutory actions, the minister said.

Earlier this month, tax officials had temporarily frozen 11 bank accounts of Kingfisher after the airline failed to pay service tax dues.

Debt-laden Kingfisher, which has been grounding planes and cutting routes to stay afloat, is scouting for funds and is negotiating with its lenders for INR7 billion rupees of working capital loans.

It has a current debt of about INR65 billion rupees to a consortium of banks led by State Bank of India.

The airline aims to cut debt to INR37 billion rupees through sale and lease back of aircraft, sale of a property in Mumbai and conversion of rupee loans into lower interest foreign loans.

Lenders to Kingfisher are awaiting a report on the airline’s viability before they approve a USD$133 million loan, sources told reporters on Monday.