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To ostensibly widen the tax base, the Income-Tax Department plans to expand the list of reportable financial transactions to include hotel payments over Rs 20,000, life insurance premium payment over Rs 50,000 and health insurance premium payment over Rs 20,000. Besides these, donations and payment of school/ college fees over Rs 1 lakh a year, foreign travel, domestic business class air travel, purchase of white goods, jewellery and paintings over Rs 1 lakh, demat accounts and even bank lockers are proposed to be included in the list of the Statement of Financial Transactions (SFT).
The new proposal was revealed on a day Prime Minister Narendra Modi announced measures aimed at easing compliance and rewarding honest taxpayers. Launching the ‘Transparent Taxation — Honouring the Honest’ platform which promises ‘faceless’ assessments and appeals, he said the tax administration would attempt to be “seamless, painless and faceless”.
A tweet issued by MyGovIndia said these measures were proposed to widen the tax base, ensure better compliance and transparency. “These are proposed measures, not yet in force. But they will create more categories in the criteria for monitoring transactions by taxpayers under the SFT,” an official said.
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More transactional categories in the SFT imply an enhanced flow of information to tax authorities, but will put the onus on taxpayers to comply voluntarily. When implemented, it will also be reflected in Form 26AS, the consolidated annual statement showing tax deductions/ collections and advance tax against an individual’s PAN.
Earlier, in July, the government had launched a revised Form 26AS which included high-value transactions from SFTs from this assessment year. In their SFTs, banks and other reporting financial institutions record details of transactions involving cash deposits aggregating Rs 10 lakh or more in a year, in one or more accounts (other than a current account and time deposit), cash payments made by any person totalling over Rs 1 lakh, and payments of bills for one or more credit card of Rs 10 lakh or more by a person in a financial year.
Further, investment in bond/debentures, shares, mutual funds, buyback of shares exceeding Rs 10 lakh in a financial year, along with purchase or sale of immovable property of Rs 30 lakh and above, by a person are recorded in the SFTs.
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Under the new faceless scheme, assessees will be expected to file their replies online, and will not be required to visit income tax offices. Artificial intelligence and data analytics will be used for team-based assessment and review of cases, the ministry said in its tweets.
The government also launched a taxpayers’ charter which states that the I-T Department is committed to treat taxpayers as honest unless there is reason to believe otherwise. While the faceless assessment scheme and taxpayers’ charter came into effect Thursday, the faceless appeals scheme will be functional from September 25.
Noting that the country’s tax structure needed fundamental reforms, the Prime Minister said, “In the faceless system, there is no need for a direct contact between the taxpayer and the income tax officer in all matters of scrutiny, notice, survey or assessment.”
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The scheme, which was adopted for 58,000 cases last year, has now been expanded to include all assessments – except those involving central charges and international tax – done through a centralised national e-assessment centre. Any other assessment order will be treated as invalid, the department said.
The charter, which the Prime Minister said was a significant step to assure “fair, courteous and rational” behaviour by the department, calls for a fair and impartial appeal and review mechanism, while respecting the taxpayers’ privacy and confidentiality. Taxpayers are expected to be honest and compliant, keep accurate records, respond and pay on time, and be aware of the information and submissions made by their authorised representative, according to the charter.
While scrutiny of cases has reduced in the last six years — from 0.94 per cent in 2012-13 to 0.26 per cent in 2018-19, the number of people filing income tax returns has increased by about 2.5 crore in the last 6-7 years, the Prime Minister said. He, however, asked more people to come forward to pay taxes, pointing out that only 1.5 crore people pay taxes in a country of 130 crore, which is “too less”.
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In an order issued Thursday, the department diverted posts of income tax officers to the national e-assessment centre (NeAC) and its regional e-assessment centres (ReAC) across the country. Since all assessments will now be done on the faceless platform, tax officials will act as a team, rather than individually, to handle assessment, verification and review of cases, a senior official said.
In another order, the department termed surveys under Section 133A of the Income Tax Act as intrusive and said only the Directorate General of Investigation and Principal Commissioner and Chief Commissioner of Income Tax-TDS (Tax Deducted at Source) will be the approving authority for conducting surveys.
