As a part of the project, data mining and Big Data analytics will be used to catch tax evaders by accessing the information on their Facebook and Instagram accounts to identify mismatches between spending patterns and income declaration.
The government introduced ‘Project Insight’ to unearth undeclared income or illegal wealth and nab tax evaders. With Project Insight, the income-tax (I-T) department aims to promote voluntary compliance and deter non-compliance, impart confidence that all eligible persons pay appropriate tax; and to promote a fair and judicious tax administration.
As a part of the project, data mining and Big Data analytics will be used to catch tax evaders by accessing the information on their Facebook and Instagram accounts to identify mismatches between spending patterns and income declaration. The information regarding international trips, new cars, houses on social media, used by taxpayers to flaunt their purchases and social status, may now be used by the I-T department to ascertain the status of a person vis-à-vis the income reported in the income-tax return (ITR).
It will further enable the I-T department to collate databases received through different filings/ reporting made with it in ITRs, withholding tax returns and statements of financial transactions and build a profile of any person. A verification can be conducted through the portal on the cases generated based on profiles of individuals. This non-intrusive tool would be used to identify tax evaders without resorting to traditional intrusive methods like search and seizure.
The project would incorporate the reporting requirement for which a reporting portal has been launched. Its reporting compliance management system will ensure that compliance by third party entities like banks and other financial institutions is timely and accurate.
From top to bottom, functionalities have been developed to create a holistic profile of those who are tax compliant as well as those who are non-compliant. A 360-degree view would enhance the I-T department’s ability to monitor the flow of funds and will provide an audit trail of high value transactions and curb circulation of black money. It would not only identify the tax evaders but would check the accountability and authenticity of the existing taxpayers.
The portal will contain exhaustive information with an integrated system for managing such information in an effective manner. It will not only contain the master file and details of movable and immovable property of the taxpayer, but also an intelligent hub, which will provide filtered information to identify non-compliant taxpayers. It will also provide revenue related details such as gross and net collection, refund, top taxpayers and tax base.
With 360-degree profiling, the I-T department would be able to access tax collection, tax base, taxpayers’ compliance, TDS and third-party reporting. Details such as master profile, asset details, ITR status, social networking and relationship would also help to create a geographic information system which would identify the specific jurisdiction requiring focus. The project is aimed at providing innumerable benefits to the I-T department. It would not only promote voluntary compliance but also identify the high-risk tax evaders. Information regarding the cases related to demonetisation and high demand cases exceeding Rs 10 lakh, where demand has been marked non-recoverable, shall also form part of the portal to assist tax officers.
The system is a transformative step, which will change the way the I-T department works. However, there are concerns regarding access to information on social media accounts and possible violation of the right to privacy.
If Project Insight proves successful, it will fulfill different objectives of the department ranging from smooth tax administration, increasing the number of tax compliant people, enhancing the tax base and ensuring accountability.
(The writer is executive director, Nangia Advisors (Andersen Global). With inputs from Radhika Arora)