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‘Non-intrusive way’ to catch tax evaders — ministry on move to scan school fee, other payments

I-T dept will analyse expenditure patterns through collected data to look for evasion. But honest taxpayers won’t be impacted, stresses the government.

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New Delhi: The Ministry of Finance has defended the proposed move by the income tax department to collect information on transactions like payment of school fees and donations, purchase of high-value items like jewellery, TVs and ACs, and domestic business and foreign travel, saying this is the most “non-intrusive way” of catching tax evaders.

Last week, the I-T department disclosed its intention to widen the scope of transaction reporting. This means financial institutions and other designated firms would need to share with the department information about certain transactions made by people.

Transactions that are proposed to be brought under the scanner include purchase of jewellery, white goods, paintings and marble above Rs 1 lakh, payment of education fees and donations of over Rs 1 lakh annually, domestic business class and foreign travel, hotel bills of Rs 20,000, electricity consumption of over Rs 1 lakh annually, and health insurance premium of Rs 20,000 and life insurance premium of Rs 50,000.


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What the ministry says

A finance ministry official, who didn’t wish to be identified, said, “It is the most non-intrusive way to identify those who spend big money on various items such as business class air travel, foreign travel, spend big money in expensive hotels, send their children to expensive schools and yet they do not file income tax return claiming that their income is less than Rs 2.5 lakh per annum.”

The official pointed out that taxpayers wouldn’t need to mention high-value transactions in their tax return forms by themselves. “The reporting of high-value transactions to the income tax department is to be done by the third parties under Income Tax Act,” the official said.

The department has stressed that reporting of such transactions will essentially be used to identify people who are out of the income tax net despite being big spenders, adding that honest taxpayers won’t be impacted.

In India, only 6.5 crore people of the 130 crore population file their income tax returns. Of these, only 1.5 crore people pay taxes.

“The information will be used to identify those who are either not filing the returns or the income disclosed in the returns are not proportionate to the pattern of expenditure reported in the SFTs (Statement of financial transactions). Such exercise will be done through data analytics and artificial intelligence. There will be no manual intervention in such exercise,” the official said.

“If we do not collect this information, then we will not be able to identify those who are avoiding or evading taxes.”

Low transaction limits raised concerns

But the I-T department’s proposed move has raised concerns over the low level of thresholds for many of these transactions.

Analysts had pointed out that the low thresholds will increase the compliance burden on firms. The Opposition also went on to add that this will lead to harassment of taxpayers and “tax terrorism”.

At present, banks and other financial institutions share information with the I-T department about high-value deposit and withdrawals, purchase of shares and mutual funds, immovable property purchases. Some of this information also gets reflected in form 26AS.


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1 COMMENT

  1. Income Tax department should also probe the Tax evasion by the school authorities which is multiple times of what an individual may be hiding. But due to the dirty nexus, only parents are being threatened by authorities and thus education is being converted into most profitable Business model.

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