New Delhi: India has drawn up a plan to widen its taxpayer base as the government aims to spend more to keep the economy buoyant.
As per the latest data with the tax department, India’s tax base is 54.3 million and its tax-to-gross domestic product (GDP) ratio, a measure of increase in tax revenue versus GDP growth, remains low at 10.74%.
To widen tax base, the income tax department will devise region-specific plans to track transactions without a valid permanent account number (PAN) and also bring to book the 5.9-million odd people who do not file tax returns, according to an action plan of the Central Board of Direct Taxes (CBDT) for 2016-17.
Mint has reviewed a copy of the plan.
Though confusion prevails due to the contradictory statements made by the government over whether Prime Minister Narendra Modi has asked the tax department to double the taxpayer base to 100 million in the recently concluded Rajasva Gyan Sangam, the tax department is going all out to catch tax evaders.
The number of non-filers was around 1.3 million three years ago.
Non-filers are those individuals who have made high-value transactions or deposited large amounts in cash but have not filed their tax returns.
CBDT has directed taxmen in every region to pursue potential taxpayers such as professionals, businesses and their employees who escape the tax net.
Tax collectors have also been asked to identify new data sources that help in widening the taxpayer base. It has also asked officials to collect details on high-value transactions from annual information reports (AIR) and stressed on efficient handling of information where the PAN quoted is not valid.
“One of the main challenges of information collected under AIR is the inability of the department in making use of information without a valid PAN," the CBDT document said, adding taxmen should identify reporting entities submitting non-PAN, AIR transactions and follow up with these financial institutions for submission of revised data with PAN. It has also suggested tracking such non-PAN data by pin code mapping and using addresses where available.
It has also suggested mining of information from tax deducted at source (TDS) and tax collected at source (TCS) statements to identify deductors who have not filed the TDS returns.
It is also looking to enhance voluntary compliance by sending reminders over email and SMS to persons who had filed their returns earlier but stopped filing. It has also proposed to display transactions coming from AIR information in the taxpayer’s 26AS form that gives details about the tax deducted and deposited on the taxpayer’s behalf.
“The government has been reiterating that it would not spare tax evaders and the CBDT action plan is no different. The objective is the effective utilization of information to widen the tax base and (improve) collection of taxes. This information-driven approach is the pillar of the strategy to widen the tax base," said Amit Maheshwari, partner, Ashok Maheshwary and Associates.
“Steps such as the collection of information about high-value transactions, ensuring compliance from identified non-filers and, most importantly, efficient handling of information without valid PAN are bound to give good results and expand the tax base," he said.