In a bid to improve tax compliance and to shore up government revenues in the upcoming fiscal year, the Centre plans greater coordinated information exchange and risk profiling by various financial and regulatory agencies. There will be an increased focus on financial transactions, such as capital gains from listed securities, dividend income, and interest from banks, post offices, etc. with the Central Board of Direct Taxes (CBDT), Central Board of Indirect Taxes and Customs (CBIC), Ministry of Corporate Affairs (MCA), Securities and Exchange Board of India (Sebi), banks and law enforcement agencies being a part of this exercise.
CBDT Chairman Pramod Chandra Mody told The Indian Express, “We have a clear understanding of sharing of information between CBIC and CBDT, with MCA, with Sebi, with the sub-registrar’s office. Multiple agencies and now banks would also be a part of it in a different manner than before. The information is coming in totality then the risk profiling is done. Depending on the risk attached to a particular transaction, it is flagged, and multiple flags would mean deeper examinations of those cases.”
The Budget estimates on the revenues side have factored in a buoyancy of 1.6 times in direct taxes. Gross tax revenues are expected to grow 16.7 per cent, with a projected rise of 22 per cent in direct taxes.
Finance Secretary Ajay Bhushan Pandey said the use of technology and data analytics will help the government in improving collections without increasing the rates. “Capital gains, dividend income, bank interest, all those things will be pre-filled. All these measures will help improve our collections. Just imagine, can it happen that if a company filed its turnover and paid X amount of GST, can he show a different turnover and determine different profit and pay lesser income tax. So these things will become very difficult now on. The information asymmetry exists across the databases, that is slowly going away. This is exactly what we have done in this budget,” Pandey told The Indian Express.
Finance Minister Nirmala Sitharaman, in her Budget speech Monday, had said that details of capital gains from listed securities, dividend income, and interest from banks, post offices, etc. will be pre-filled in income tax returns along with existing details of salary income, tax payments, TDS, etc.
When asked if this would lead to rise in enforcement actions by the tax department, Mody said that with data analytics, taxpayers would be aware of the information that is under scanner and would help to improve the compliance culture and limit underreporting/ misreporting of transactions.
“Ultimately this leads to what — better compliance, and even differentiators would be part of the system. So, all that put together should get you the results, which we are expecting. It is not just numbers, it is the question of ease with which this information flows from one agency to another and a concerted action on part of all of us will improve the compliance culture. People who are trying to game the system would not be able to do that … it’s a two-pronged thing. You’re facilitating the person who is paying, and you’re trying to get the person who is outside the system into the system,” the CBDT chief said.
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