RAISING WHAT appears to be the first red flag on the possibility of taxpayers being harassed post-demonetisation, Arvind Panagariya, vice chairperson of Niti Aayog, is learnt to have written to the Prime Minister’s Office highlighting the need to codify rules to ensure that people, especially women, are not made to suffer for having deposited old notes between November 8 and December 30.
According to government sources, Panagariya suggested that there should be no questions asked on cash deposits up to Rs 2.5 lakh. This would help the taxman and the taxpayer, given the large number of depositors during the last 50 days. The income-tax department has been receiving information about cash deposits of over Rs 2 lakh and Rs 5 lakh from banks on a daily basis.
Panagariya has also said that there should be some “generous” formula to determine annual savings of women, which would have been deposited by them in bank accounts. In India, housewives tend to set aside some part of their husbands’ salaries as secret savings in cash. He is learnt to have said the amounts that a housewife could have accumulated had to be some generous percentage of her husband’s income.
Panagariya said the demonetisation decision has also provided an opportunity to codify tax rules. This would simplify the tax regime and can prompt the government to consider lowering rates. There have been fears that largescale tax scrutiny of individuals will raise the spectre of inspector raj and nullify the gains made by pushing ‘ease of doing business’ across all government departments.
With almost 40 crore bank account holders in India, a scrutiny of even one per cent would mean 40 lakh accounts. The I-T department, on an average, undertakes scrutiny of just 3.5 lakh taxpayers every year. But this year, the department plans to analyse ‘big data’ on financial transactions being provided by banks during the demonetisation period.