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    Financial transactions such as hotel bills, life, health insurance proposed to come under tax lens

    Synopsis

    In a tweet by mygov.in, which was subsequently removed, the govt has proposed to expand the list of reportable transactions to include domestic business class air travel or foreign travel, payment of property tax above Rs 20,000 per year, life insurance premium above Rs 50,000 and health insurance premium above Rs 20,000.

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    NEW DELHI: The income tax department proposes to keep a watch on transactions such as hotel bills exceeding Rs 20,000, education fees of more than Rs 1 lakh as well as the purchase of jewelry, white goods, marble or paintings above Rs 1 lakh among others, looking to widen the tax base and plug tax evasion.

    The government handle mygov.in tweeted this on Thursday night, but the tweet was deleted without giving any explanation. An income tax department official said Friday that while such a move hadn’t been notified, all of these transactions could come under scrutiny going forward. Based on the tweet, the department also proposes to expand the list of reportable transactions to include domestic business class air travel, foreign travel, cash deposits of Rs 10 lakh or more in a noncurrent account, sale of foreign exchange above Rs 10 lakh, payment of property tax above Rs 20,000 per year, life insurance premium above Rs 50,000 and health insurance premium above Rs 20,000.

    Details of transactions captured by the department are communicated to the taxpayer via form 26AS. To bring all these transactions under the tax scanner will require the amendment of rules and sections of the Income Tax Act, officials said. Prime Minister Narendra Modi had asked people to pay their fair share of taxes, given that India’s tax base was relatively small.

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    “Only 1.5 crore people pay taxes in a country of 130 crores,” he pointed out on Thursday, while launching a taxpayer’s charter and faceless assessment. “Introspect and come forward to pay the taxes due.” To be sure, some of the transactions cited are already reported by taxpayers in annual returns. Others related to share transactions, demat accounts, bank lockers, deposits in current accounts above `50 lakh and deposits in noncurrent accounts above Rs 25 lakh are already captured by companies or financial institutions and reported to the income tax department under Rule 114-E, experts said.

    Certain provisions of Section 139 would have to be amended to include the compulsory filing of returns in the case of persons making bank transactions above Rs 30 lakh, all professionals and businesses having a turnover above Rs 50 lakh and rental income of more than Rs 40,000. By including these transactions in the list of those that need to be reported by companies, financial institutions and other entities as well as individual taxpayers, the authorities will be able to better identify those who may be making large purchases but not paying the right amount of tax, experts said.

    “The proposed expansion would result in better monitoring of transactions and consequently expansion of the tax base,” said Amit Maheshwari, tax partner at AKM Global. The gathering of greater amounts of data will result in increased profiling of existing and potential taxpayers through the use of artificial intelligence and machine learning to mine this vast trove of information, experts added.

    “With these reporting requirements, more persons would come forward to file their tax returns or tax authorities may seek reasons for not filing the tax returns basis financial transactions,” said Shailesh Kumar, partner at Nangia & Co LLP.

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    32 Comments on this Story

    Mandar Deshmukh37 days ago
    Now a days due to corona pandemic, each individual buying health cover. Family floater plan of 12-15 lakhs sum insured can breach limit of 20k. Even courses like Engineering cost a fee of more than 1 lakh per year. Professional courses like MBA will cost even more than 1 lakh. Not a good idea to track such type of transactions.
    Pratyay Bhaumik43 days ago
    What happens when Corona claims all the tax payers of India or govt leaches and bleaches all of them white ? How govt will finance administration and populism ? Will the rush to become neta slow down ? Will capitalism researve democracy in poor countries only ? India may be a test case after Corona squeeze.
    VIJAYA KUMAR B S43 days ago
    God only should save the honest tax payers.
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