The finance ministry has finalised a three-pronged action plan to beef up tax administration to provide better service to tax payers even while widening the tax base and plugging tax evasion.
According to the plan, the revenue department would complete all tax refunds to the salaried tax payers all over the country by July 31. A comprehensive data bank of all tax payers would be put in place by November to track their specified transactions. Also, special emphasis would be laid on non-salaried tax payers in the Rs 2-5 lakh income category so that the incidence of tax evasion in this group is minimised.
The plan has been finalised in keeping with the new finance minister, Jaswant Singh's approach that while tax evasion should be curbed, the genuine tax payer's problems should be expeditiously settled. The idea is dispel the impression that the finance ministry is a police station and the finance minister a police man.
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Singh held a meeting with the revenue secretary on Saturday and is reported to have made detailed inquiries about delays in refunds to tax payers. A decision has now been taken to complete all tax refunds for the last finance year for the salaried class by July 31. For salaried tax payers in the Capital, the refunds are expected to be completed by July 15.
Simultaneously, the ministry is putting in place a plan to instal a huge computerised data bank at an estimated cost of Rs 250 crore. The expenditure finance committee of the ministry has cleared the proposal and the Cabinet is expected to clear it in a few days. The data bank would enable the tax authorities to match the permanent account numbers (PAN) of all tax payers for all specified transactions to check if there has been any tax evasion.
To begin with, the ministry proposes to make declaration of PAN for all transactions involving foreign travel, stay in five star hotels and purchase of luxury cars. All such declarations would be matched with their income declaration with the help of the data bank. This is expected to bring about greater tax compliance and the scope for tax evasion would be reduced.
The ministry is also focusing on the relatively small number of non-salaried tax payers and the amount of tax collected from them. It is estimated that about 79 per cent of non-salaried tax payers show a returned income below Rs 1 lakh, while about 46 per cent of salaried tax payers show returned income below Rs 1 lakh. Maintaining a similar trend, about 25 per cent of salaried tax payers are in the income range of Rs 1.5-5 lakh, while only about 8.34 per cent of non-salaried tax payers show an income between Rs 1.5 lakh and Rs 5 lakh.
The ministry's assessment is that if only the government could increase the number of tax-payers in this Rs 1.5-5 lakh category from the current level of 10 lakh to 14 lakh, then there would be an increase in the revenue collection of about Rs 2,000 crore. This increase could offset any loss in revenue that may result in any proposed tax relief to the salaried tax-payers, it is being argued.
Accordingly, an exercise to examine measures to increase the number of non-salaried tax payers in the Rs 1.5-5 lakh category has already been initiated. A clearer picture would emerge in the coming weeks.