‘We are better placed now to nab tax evaders’
UNDER LENS Tax department only takes up those cases for scrutiny where there are information about tax evasion: CBDT chief
NEWDELHI: Big data on financial behaviour of individuals and businesses secured from sources ranging from social network to tax treaties is making tax administration faceless and non-intrusive, yet precise in picking up cases warranting a long, hard look. In an interview, Sushil Chandra, chairman of the Central Board of Direct Taxes (CBDT) spoke about how the approach to taxation is changing and how the authority is prepared to deal with corporations crossing the line in tax planning. Edited excerpts:
You have addressed roundtripping, the practice of routing funds across markets to avoid taxes. What is your next biggest worry?
All persons who are supposed to be paying taxes should pay taxes. Now we have a large information network and we are using sophisticated data analytics. Salaried individuals whose taxes are deducted at source by employers do not file returns, which is wrong. Everyone should file returns.
There has been a drive to broaden the tax base and curb unaccounted wealth. What next?
We now have access to a large amount of data as a result of demonetisation and compulsory reporting of specified financial transactions by agencies. We also have better technology to match this data with the tax profiles of those who have filed returns as well as of those who have not. That gives us a leverage to deepen the tax base. Our Project Insight that uses data analytics is ready and will be launched shortly. We get information about transactions such as car and property purchase and a host of other financial transactions. If the data we get do not match with the tax profile of assessee, it warrants a scrutiny. We have identified 14,000 people who bought property worth over ₹1 crore but have not filed returns. We are taking action against them. All investments are on our radar.
Tax evaders manage to stay one step ahead of the regulators. Do you think the balance is finally shifting in favour of the taxman?
Finally, we have got an edge over tax evaders. Earlier, people used to park funds abroad to avoid taxes. Now, we get a lot of information automatically from other countries under tax treaties. We match this information with the returns. We are better placed to nab evaders.
Some are worried that the crackdown on black money may bring back the Inspector Raj...
Scrutiny of returns is computer-assisted and we take up only those cases for scrutiny where we have specific information about tax evasion or where returns do not meet standard parameters. Less than one per cent of all returns are picked up for scrutiny. Nearly half of all cases chosen for scrutiny are subjected to only limited scrutiny where explanations are sought on a specific transaction. Scrutiny has not gone up. Rather, we would like to reduce it further and act only on specific information. We also allow e-assessment for limited scrutiny. Our job is to ensure that honest tax payers’ life is easier and hassle-free, while tax evaders should be brought to justice.
Going forward, do we see the corporate tax rate coming down from 30% to 25%?
In the 2017-18 budget, we reduced the tax rate to 25% for micro, small and medium companies (with annual revenue of less than ₹50 crore a year). That covered 96% of companies in the country. We are in the mode of phasing out more corporate tax exemptions. When there is higher tax buoyancy, the government will consider further tax rate cuts.
What about personal income tax rate?
In personal income tax, we have already reduced the rate to 5% (on income between ₹2.5-5 lakh). If you take into account the tax exemption limit of ₹2.5 lakh and the benefit of ₹1.5 lakh deduction under 80C (investments in provident fund, life insurance premium payments etc), income tax in India is the lowest in the world. The mindset of concealing income should change when tax rates are so low.