Also says market value concerns to be addressed
Stressing her commitment to a non-adversarial tax regime, the Central Board of Direct Taxes (CBDT) chairperson Rani Singh Nair told FE in an interview that some 7 lakh people whose transactions without PAN linkage have been seen and publicised by the tax department will have a chance to declare their tax-evaded assets under the ongoing Income Disclosure Scheme (IDS) by September 30. One has two options: Provide the PAN for the transaction — which the department will seek to justify with the corresponding tax return — or opt for IDS, she said, adding that, if both options are not exercised, then “we will look at how to reach them”. Under the Income Tax Act, tax evaders are made to pay hefty penalties.
Sounding optimistic about IDS’ utility — in the past, such schemes have seldom worked, except to an extent the 1985 amnesty circular and VDIS 1997 — Nair also hinted at addressing the concerns expressed by some quarters about the market value of the assets disclosed under the scheme to be taken as on June 1, 2016, while the assets might have been acquired at far lower prices several years ago. “Yes, (the grievance) has come to (our notice). We are looking at it and we will clarify it in the next FAQ, which will be issued this week. We will clarify as many things as possible (to make IDS work).”
Nair stressed that “IDS declarations would be fire-walled”. She said the CBDT would soon issue a notification expressly stating that IDS would be accepted as declaration by the department during future search and seizure operations also. “If, say, 10 years later a search happens, then you can say that you have declared this house/land/ share in the IDS. So you will be saved. People should believe us when we are saying that we are not going to share the IDS data — not only with anyone outside but also within the department,” the official said.
Under IDS, one can declare undisclosed domestic assets and pay 45% tax (30% tax, Krishi Kalyan cess of 25% on the tax and 12% penalty on 25% of the tax) to avoid any further probe or adverse action. Although the tax rate is lower than 60% levied in the 2015 foreign assets disclosure scheme that nearly fell flat, most analysts are not confident that even IDS would draw big disclosures.
According to Nair, the department, which has been assiduously trying to cut litigation and adopt best global practices to be taxpayer-friendly, would increasingly rely on “big data” for making the tax administration efficient and non-intrusive at the same time. Asked whether the scrutiny will be increased from 1% (of returns) now and what exactly were the criteria for the same, she said given the huge repository of data and increased ability to make use of them under computerised management, the incidence of scrutiny could change to meet objective of eliminating frauds of various kind. The selection of cases of scrutiny is based on computer-based algorithms that allow greater precision and increase utility.
Rani Singh Nair said the department’s non-filers monitoring system (NMS) have yielded big dividends: 1 crore returns have come to us as a result of the scheme, enriching the exchequer by Rs 11,600 crore over years.
On the drive to cut the backlog of litigation and settle disputes easily, the official said while the department had been “very fair to the taxpayer” in implementing the dispute resolution scheme, which avoids prosecution and penalty if the tax computed up to the time of assessment is paid with interest, when it comes to settlement via courts also, the department has enhanced the threshold for filing of second appeals. “Last year, we withdrew as many as 7,000 appeals from the I-T appellate tribunal and 4,000 from the high courts,” she said.
On the need to widen the tax base, Nair said recent studies suggested the missing taxpayers were more at the lower end, although the problem of high-income people evading taxes also existed. “We need to widen (the base) at the lower end and deepen at the higher end, where there are people not declaring their full incomes. We have a tax base of 6 crore people — 5 crore who file returns and others who don’t file returns but whose taxes are deducted at source.”