Though the taxman is set to dramatically scale up his offensive against potential tax evaders, the good news is that less than a fifth of high-value purchases are taking place without keeping the taxman in the loop ? that is, without valid permanent account numbers (PANs).
The taxman collects data on high-value transactions from what is called the Annual Information Return (AIR) ? there are 7 items here including credit card payments of over R2 lakh per annum and property purchases worth more than R30 lakh ? as well as from its commercial intelligence. This would include, say, people who buy cars or gold or jewellery above a certain amount.
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In FY12, AIR data showed 38.7 lakh transacting parties making purchases of R79.5 lakh crore while using valid PANs; 14.1 lakh transacting parties made purchases of R14.1 lakh crore without valid PANs ? that is, 17% of the transactions could possibly be evading taxes.
In the case of the larger Central Information Branch (CIB) data, a total of 10.7 crore transacting parties bought goods worth R2.2 lakh crore with valid PANs and 2.2 crore persons made purchases of R46 lakh crore sans valid PANs ? that means nearly a fifth of transactions were potentially made by not paying taxes. Such transactions include trips made by frequent fliers to tax havens, high spends on weddings and purchase of gold and cars.
While that is good news for those looking at how black the economy is, the amounts are still large in terms of potential taxes; so the taxman plans to send a total of 15 lakh letters to this ?database? of 2.4 crore persons this year. In FY13, a total of 1 lakh letters were sent and this resulted in the tax department getting over 1.25 lakh returns filed.
According to a senior finance ministry official, the department had prepared a list of 12 lakh people last year, out of which 1 lakh were sent letters ? under the ?non-filers management system? ? giving details of their transactions and asking them to file their returns. ?This has been very fruitful and 70,000 more such letters have been sent this year from that list. It has been decided that the letters would be sent to all in that list and also to those who will be added this year.
In total, such letters are expected to be sent to about 15-16 lakh people this year,? said the official.
The department?s overdrive emanates from the fact that though its annual central action plans target an increase of 15% per year in number of assessees/tax base, the annual increase during the 10-year period from FY02 to FY11 was only 3.1% (from 262 lakh to 337 lakh assessees), while the average GDP growth during the same period exceeded 7.7%.
The action plan for FY14 includes identification and action against corporate and non-corporate non-filers as a specific project with collection and uploading of the data collected by the CIB into the income tax online system. Action in the non-PAN and invalid PAN cases reported in the AIR and CIB-collected transactions from other sources pertaining to FY12 is also part of the strategy.
The process of matching the huge non-PAN/invalid PAN data with the PAN database in the income tax department system for populating PAN has been slow in the last few years. During FY13, the department could issue query letters in 2,49,823 non-PAN/invalid PAN cases and in 88,719 cases, PAN was populated. Information pertaining to only 1,04,267 cases of non-PAN AIR was given to field authorities for further action, which has been considered grossly inadequate considering the volume of data department has gathered from third parties.
The department in the short-term, as outlined in its strategy being discussed in the two-day conference of chief commissioners and director generals, emphasises upon putting in place software solutions for bulk matching of non-PAN data with the data available in the income tax system.
Management of ?stop filers? of returns by matching data of persons who had earlier filed returns showing more than Rs 10 lakh income in the last three financial years is also one of the action points in FY14.