I-T to push for taxpayer compliance2 min read . Updated: 20 Jul 2020, 09:27 PM IST
- The process was disclosed by the Centre in clarifications published on Saturday to tax rules that are effective from 1 June
- From now on, the tax department is set to flag taxpayers a detailed list of transactions that it expects to be reflected in the reported taxable income
Filing tax returns in India is set to change radically: rather than merely asking you to come clean, the income tax department is now set to tell you about every transaction you’ve made, expecting you to show that they match your income.
Information that until now was shared only with tax investigation authorities—data from banks, credit card firms, registrar of properties, for instance—is now set to be shared with the taxpayer.
Instead of facing greater tax scrutiny, therefore, it will be up to the taxpayer to come clean to participate in this process of due diligence for matching assets with income.
The process was disclosed by the Centre in clarifications published on Saturday to tax rules that are effective from 1 June.
The move seeks to broaden the government’s tax net at a time when the number of returns filed have declined around 2% in FY19 after growing more than 20% for two years—FY17 and FY18—following the 2016 demonetization of high-value currency notes.
From now on, the tax department is set to flag taxpayers a detailed list of transactions that it expects to be reflected in the reported taxable income.
This list of transactions would be more exhaustive than the details specified in the earlier version of form 26 AS, a tax credit statement that showed taxes deducted and collected at source (TDS and TCS) relating to a PAN, details of other taxes paid, refunds and TDS defaults.
The revamped form 26 AS will give a host of other information that used to be collected in the past but was shared only with the intelligence wing of the department for matching with reported income for investigation purposes. The form will be a live document as it will be updated within three months of the department receiving details.
The Central Board of Direct Taxes (CBDT) said on Saturday that it receives details like bank transactions, sale or purchase of property, credit card payments and purchase of shares from market players. All of this will now be reported back to the assessee in the revamped form 26AS. A taste of the new pre-emptive approach comes in an 11-day drive launched by the tax department to boost return filings for FY19.
Starting Monday, the department will organize an ‘e-campaign’—shooting emails and text messages to people who have either not filed tax returns or have not offered the right amount for taxation for FY19, going by their high-value transactions that agencies have reported to the department. Assessees have the option to confirm, deny or modify these transactions and file or revise their returns. “This would act as a due diligence report of the taxpayer," said Ved Jain, former president of Institute of Chartered Accountants of India.
Jain welcomed the move, saying it will reduce the workload on the department but assessees should also be offered the opportunity to explain the transactions in the return filing utility.
One key ‘specified financial transaction’ that taxpayers will be reminded of will be information about ownership of assets or income abroad which the taxman has secured through a treaty with authorities in other countries.
Taxpayers will have access to details of all the specified financial transactions filed by reporting entities against their permanent account number, according to Archit Gupta, founder and Chief Executive Officer of ClearTax, a technology company offering tax payer services. “In the near future, details of financial transactions related to the stock markets may also be included," said Gupta.