Big Brother is watching you

300,000 companies in tax information network.

Here's a warning for companies that deduct taxes from their employees but do not deposit the full sum with the banks for the government. Big brother is watching.

The government can now match the tax returns companies file with the taxes actually remitted to the collecting banks, thanks to the Tax Information Network (TIN), managed by the National Securities Depository Ltd (NSDL). TIN is up and running, with close to 300,000 companies having filed tax returns for the assessment year 2004-05.

What is more, companies may not be able to dodge sales tax payments in future either. Spurred by the huge success of the implementation of TIN, the sales tax departments of several states have approached the NSDL to develop a similar module for them, NSDL executives told Business Standard.

Here is how TIN works. NSDL has set up 529 TIN facilitation centres, where the companies can file the returns in electronic format. Jayesh Sule, senior vice-president, NSDL, says the facilitation centres are located in 193 towns and cities.

The facilitation centres are, in turn, linked to the main NSDL TIN network through leased lines or dial-up systems. It takes a maximum of four days for the information to travel from the company's database to the income-tax department. In parallel, NSDL sends out a consolidated statement to the income-tax department every quarter.

On the other side of the data stream, the 12,000-odd branches of the 33 designated collecting banks are also linked to NSDL's TIN network through their nodal branches. There is a challan identification number and this is sent to TIN with all the necessary information on the actual payment of taxes.

Incidentally, NSDL also has a facility for companies to access the status of their challan through the challan enquiry system. This gives them an idea whether the challan has actually been received by the IT department.

NSDL's Sule said so far 300,000 deductors had filed their returns for the current assessment year, a quantum jump from the 100,000 returns filed in the previous assessment year.

Electronic filing of returns was made mandatory for corporates from June 2003. Almost 65 million records had been uploaded so far in the first phase, he added. NSDL has plans to extend TIN to other categories of tax.

While the first phase only covers taxes on salaries and corporate payments, Sule said in the second phase the government would be covered.

Departments such as the public works department and others that deduct tax at source on payments to contractors will be covered. The second phase will also cover non-government and non-corporate entities.