High Value Transactions- Govt. New Proposal To Widen Taxbase
1. INTRODUCTION
“No. of taxpayers are significantly low with only 1.5 Crore paying taxes out of 130 Crore people” Hon’ble PM Narendra Modi said while launching platform for ‘Transparent Taxation’-Honouring the Honest on 13th August 2020. The Post in twitter handle on same day revealed a fresh set of expenditure items to be traced by Income-tax Department. The tweet was subsequently deleted but the details reveal that Income-tax Dept. wants to expand the list of Reportable Financial Transactions to increase tax base. Govt. proposed to introduce 11 new transactions which will appear in Form 26AS and compulsory filing of returns for certain persons.
2. Proposal To Add 11 New Transactions In Form 26AS
1) Education related fees and donations above 1 lakh in a year.
2) Electricity bills of above 1 lakh in a year
3) Domestic business class air travel or foreign travel.
4) Hotel bills above Rs.20,000/-
5) Purchase of jewellery, white goods, paintings, marble, etc. above Rs.1lakh. White goods includes Electronic Products i.e. TV, Refrigerator, Washing Machine.
6) Deposits or withdrawals above 50lakhs in Current Accounts.
7) Deposits or withdrawals above 25lakhs in Non-Current Accounts.
8) Payment of property tax above Rs.20,000/- per annum.
9) Life Insurance premium above Rs.50,000/-.
10) Health Insurance premium above Rs.20,000/-.
11) Share Transactions, Demat account and bank lockers.
3. Proposal For Compulsory Filing Of Income-Tax Returns
1) By those having bank transactions above 30lakhs.
2) All businesses having turnover of more than Rs.50lakhs
3) Payment of rent above Rs.40000/-
4) Deduct TDS at higher rates for those who do not file income-tax returns.
4. HOW GOVT. WILL KNOW ABOUT THESE TRANSACTIONS-
PM Modi focused on Less Compliance and Clear Compliance. But this seems to be contradictory with the above proposal. If any persons enters into above transactions then it will be additional burden on Schools, Colleges, Hotels, Jewellery Shopkeepers, Galleries, businessman, etc. to maintain data of persons who purchases from them and then report to Govt. Already businesses are reporting detailed transactions in GST returns. The proposed additional burden may increase compliance on businesses and it may harm ranking of Ease of Business as 63rd as said by PM Modi.
5. IMPLEMENTION OF ABOVE PROPOSAL-THE BIGGER CHALLENGE-
There is nothing that is impossible to implement but it requires highest level of planning to overcome the challenge that comes into the way when we take bold move. The challenges may be-
1) How these proposals may be implemented beyond cities where there are network issues?
2)Will businessman do Business or only Compliances?
3) How reconciliation of proposed expenses with income can be done in electronic mode since it is now E-Assessment?
OUR COMMENTS-
Govt. has to take certain steps to ensure higher filing of returns and payment of taxes. But at the same time it should ensure that it does not forces any person to file return or explain their expenditures when their income is below taxable limit. They may make hotel bill payments or pay travel bills from their accumulated savings. Govt. should trace big ticket transactions incurred by higher income earning persons rather than tracing transactions with smaller values which results in unnecessary problems for middle class and lower middle class persons. We cannot ignore that these bold moves of Govt. are taking our nation to one step higher but at the same time it should not hurt feelings, emotions and financial liberty of the citizens of India. But at present it is only a proposal and has not be notified yet.
*****
The above comments do not constitute professional advice. The Author can be reached at companyfinancialtree@gmail.com. My name is CA Divya Agrawal and I am Practising Chartered Accountant. I also upload educational videos in You tube and name of my channel is FINANCIAL TREE COMPANY. Soon we are launching our website- www.financialtreecompany.com. My aim is to help people in improving their financial health by spreading knowledge and love. Stay Financially Fit and Healthy.
Author Bio
Tax filing forms I 2 ,3, 4 ,etc are so complecated that even an educated person needs the CA to file his return.
One hand Govt is pleading for simplification & on the other hand the ITR forms are being made so comlecated & cumbersome that forget for filling the same ,even to understand is difficult .
Income tax 2020 has taxed Dividend income in the hands of recieving person.
Earlier as far as I know the Dividend was not to be taxed as profits of the Company is distributed after paying tax. .Now the Govt has over rulled the earlier decisions & taxinf the company profits twice. How far this justified.??
2 Long Term Capital Gain is being taxed while STT is also being levied. Govt. Must do only one of the thing
3. Govt. Introduced service tax with the intantion of anolicing the Income Tax. But we finf the service tax has been increaded from 8% to now 18 % but the Income tax rates are not reduced or abolished.
The Government is unnecessarily increasing the work load of everyone in the hope that many will commit mistakes and can earn revenue by penalty, late fees etc., absolutely wrong approach. The Tax Terror Regime is returning. I feel that the assessee should be asked to submit his Bank Account Statements and the Department can file the ITR to be checked and assessed bey the assessee rather than asking it the other way. WE ARE DEFINITELY HEADED TOWARDS TAX TERROR REGIME..
Failure incompetent in running economy just want to increase taxes to hide failures.
As you rightly said, compliance of this information feed by schools/colleges (for fees) and landlords (for rent received) will be very difficult. This requirement means that every person who rents a place or has school/college going children, has to register his/her PAN with the landlord/school. It is not clear if the limit of Rs 20,000/- towards hotel bills is per day or per year. What about business travellers whose hotel bills are paid by their employers? How does a hotel distinguish between a business payment and a personal payment, if a traveller uses a credit/debit card provided by his employer?
A family with more than one school/college going child may choose to pay the fees by either parent at different times, depending upon finances. How would this affect the scheme to arrive at the source of funds?
This type of information gathering is nothing short of too much of intrusion into the personal affairs of tax payers. One Delhi HC court judge has already said that the information asked for on the I-T Return is very voluminous, and takes a lot of time to collect and report. The proposal to add more items for inclusion in form 26AS would mean even more time for Return related matters, if a tax official asks for more information based on form 26AS.
It might make some sense if the payments referred to in the proposal, are required only in case of cash used, but even then the compliance by the recipients of the cash would be enormous.
On one hand, the Govt. wants simplification of the tax system but this type of additional information needs is going to make compliance time-consuming and possibly result in harassment of tax filers.
1.Persons who enter into share transactions, have Demat Accounts and bank Lockers are taken into consideration. It has not been cleared yet what all will be reported. Regarding Share transactions and Demat Account there is an existing provision that if any person purchases shares or Units of Mutual Funds above Rs.10 lacs, it will be displayed in Form 26AS.
2. As regards rent above Rs.40000/- logically it should be 40000/- per month.
The proposal has only been twitted, it is not notified yet, therefore we do not have much clarity.
11) Share Transactions, Demat account and bank lockers. whether all will be reported ?
3) Payment of rent above Rs.40000/-
per month ???