Income Tax department proposes to keep watch on financial transactions

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Income Tax department to keep watch on financial transactions to widen the tax base and plug tax evasion, according to a tweet by mygov.in.

According to the tweet, the transactions include hotel bills exceeding Rs 20,000, education fees of more than Rs 1 lakh as well as the purchase of jewelry, white goods, marble, or paintings above Rs 1 lakh. Such a move is not yet notified, according to officials, but all these transactions could come under scrutiny going forward. 

Foreign travel, domestic business class travel, life insurance premium above Rs 50,000, health insurance premium above Rs 20,000, cash deposits of Rs 10 lakh or more in a noncurrent account, sale of foreign exchange above Rs 10 lakh, payment of property tax above Rs 20,000 per year are included to the list of reportable transactions. The details of the transactions are communicated to the taxpayer via form 26AS. 

According to the officials, amendment of rules and sections of the Income Tax Act is required to bring all these transactions under the tax scanner. Prime Minister Narendra Modi urged people to pay their fair share of taxes, given that India’s tax base was relatively small. Taxpayers in their annual returns already report some transactions cited and others related to Demat accounts, bank lockers, share transactions, deposits in noncurrent accounts above rupees 25 lakh, and deposits in current accounts above rupees 50 lakh are already captured by companies or Financial Institutions and reported under rule 114 – E. 

For persons making bank transactions above rupees 30 lakh, all professionals and businesses having a turnover above rupees 50 lakh and rental income of more than rupees 40000, certain provisions of Section 139 would have to be amended to include compulsory filing of returns. The authorities will be able to better identify those who may be making large purchases but not paying the right amount of tax by including these transactions in the list of those that need to be reported by companies, financial institutions, and other entities as well as individual taxpayers.

The use of artificial intelligence and machine learning to mine information will help in gathering greater amounts of data and hence will help in increasing the number of existing and potential taxpayers, according to the experts.

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