Expat staff under taxman's lens

Expat employees, paid dollar-indexed salaries and allowances by companies in India, will now have the taxman looking closely at their returns to check whether tax has been deducted at source.

Reason: The number of foreign nationals working in the country has grown, particularly in sectors like civil aviation and telecom, and the hospitality business.

It's not just multinationals which are being watched by the tax department. The Central Board of Direct Taxes (CBDT) has asked its field formations to watch for TDS compliance at large government agencies such as the armed forces, the Indian Railways, and the department of posts.

Sources said the CBDT wants these government agencies to deduct TDS on payments made for various work contracts, as also professional and technical services sourced out.

In addition to the above category, the CBDT is keen to check avoidance of tax collected at source (TCS) for payments received on account of granting of contracts, licences, or lease for mining and quarrying activities.

Every year, the CBDT provides an indicative list to its field formations, identifying possible areas of tax avoidance. TDS is an important and growing source of direct tax revenue for the government, and accounts for nearly 35 % of the annual revenue collections.

The department feels several new economic activities need to be brought under TDS' purview.