FM's anti-tax evasion step faces hurdles

The Finance Ministry is yet to implement the anti-tax evasion measure announced in the Budget which required banks to submit details of all deposits whose interests were exempt from Tax Deducted at Source (TDS).

Finance ministry officials said there were issues in enforcing the announcement and the income-tax department had now set up a committee, under member legislation M H Kherawala, to look into them and submit its recommendations before December 31.

Finance Minister P Chidambaram had proposed two anti-tax evasion measures in his Budget speech, the Banking Cash Transaction Tax (BCTT) on all cash withdrawals made from a current account of over Rs 10,000 and a requirement by banks to report details of all deposits "which are exempt from TDS on interest".

"I intend to observe the results of these steps before I propose any further measures," he had said.

Banks were required to submit details of such deposits quarterly and forms had been notified under Section 206A. However, the finance ministry in September this year extended the due date for filing returns for the quarters ending June 2005 and September 2005 to December 31, 2005.

Officials said the main problem lay in finalising a format to collect the requisite data from the banks. "Since the information is required to be filed by banks every quarter, one has to finalise the kind of format in which the data would be required. Since each branch of a bank maintains thousands of deposits, the data collected from such an exercise would be enormous and could be difficult for the department to handle," an official said.

Another difficulty in compiling such information is that the exercise covers deposits which do not require quoting of a Permanent Account Number. "Since such deposits do not require PAN, it would be a massive exercise for the department to collate the PAN simply from the deposit account number," an official said.

The exercise is aimed at collecting information on deposits of less than Rs 50,000 which earn interests of less than Rs 5,000 annually and hence do not come under the department's lens as there is no TDS on the amount.

---

TAXING TROUBLE

Main problem lay in finalising a format to collect the requisite data from the banks

Another difficulty in compiling such information is that the exercise covers deposits which do not require quoting of a PAN

A committee has been set up to look into problems and submit its recommendations before December 31