Mumbai: Mumbai’s income-tax (I-T) payers could feel the heat amid a drive to step up direct tax collections this year to cover a likely shortfall. The Mumbai I-T department is targeting the Rs 2.1 trillion in arrears that were owed at the end of the last fiscal year and is willing to take stringent action, where needed, to meet the new revenue target.
“We have no option but to focus on arrears to meet the target,” said a senior I-T official, who did not want to be named.
Mumbai’s I-T payers account for one-third of India’s total direct tax collections. Arrears are owed by companies and individuals, according to an internal report of the Mumbai I-T department that Mint has reviewed.
The arrears assume significance as the finance ministry last week raised the direct tax collection target for the fiscal by 10% to Rs 5.85 trillion from Rs 5.32 trillion, to make up for petroleum product duty cuts. A major proportion of the increase has been assigned to Mumbai and the department is relying on arrears to meet the new Rs 2.04 trillion target. Direct tax collections in Mumbai last year were Rs 1.53 trillion, in line with the target.
According to the I-T report reviewed by Mint, defaulters with inadequate assets owed Rs 1.05 trillion, while Rs 30,000 crore was locked up in disputes at various levels of litigation.
The tax agency is now planning to conduct recovery surveys based on data provided by banks and Credit Information Bureau (India) Ltd (Cibil).
“We have contacted banks and Cibil for credit information of the taxpayers who claim to have inadequate assets because we have found that in a number of cases, the information provided to the department is incorrect,” the same official said.
The I-T department has also decided to take strong action against habitual defaulters.
“This power to arrest and detain tax evaders has been rarely used in the past, but we have decided to use it now because of rising tax arrears,” said another senior I-T official.
According to the I-T report, Rs 25,000 crore is due from companies where a mismatch of tax deducted at source was detected. Arrears from taxpayers who have moved out of Mumbai and haven’t filed returns is Rs 4,000 crore, while Rs 3,500 crore is due from companies declared sick and being liquidated. Another Rs 2,000 crore is locked up in cases before the settlement commission, while Rs 1,000 crore is stuck in cases where courts have granted a stay.
The settlement commission, official liquidators and the Board for Industrial and Financial Reconstruction have been asked to expedite pending cases.