 "Govt looks to curb domestic circulation of black money")
After cracking down on unaccounted money stashed abroad by Indians, the government is now working to curb domestic flow of black money, by plugging gaps in regulations.
At present, the Central Board of Direct Taxes (CBDT) is looking to rationalise income-tax rules; the move includes widening of coverage for mandatory quoting of permanent account number (PAN) for specified transactions. Also, it is considering expanding the scope of mandatory annual information returns (AIRs) for third-party agencies, to capture greater information, in line with the government's efforts to build a large database for checking tax evasion and the flow of black money in the economy.
"To curtail the flow of domestic black money in the economy, we are working to strengthen capture of information by rationalising two rules under the income-tax act - mandatory issuance of PAN card and the mandatory annual information returns (114B and 114E, respectively)," said a government official.
At present, quoting of PAN is mandatory for sale or purchase of any immovable property valued at Rs 5 lakh or more, purchase of any motor vehicle, and payment of bills exceeding Rs 25,000 in one go at hotels and restaurants, among other things.
The government is looking at lowering thresholds for mandatory furnishing of PAN card where they are too high, and increasing the limits where they are too low. Besides, it will add new items to the list of transactions where furnishing of PAN is mandatory. Some irrelevant transactions will be removed from that list.
In the case of AIRs, the government will likely expand the list of third-party sources for mandatory reporting (seven sources at present), and also revisit the thresholds.
"We will revisit the thresholds by lowering them in the cases where they are too high, and raise the limits in the cases where they are too low and lead to excessive information flow that we do not require - for both PAN card furnishing and AIR. We will add more transactions and third-party sources to the list for AIR and delete those that have become irrelevant. Basically, it will be rationalisation of income-tax rules," he added.
Quoting PAN is mandatory for cash deposits aggregating Rs 50,000 or more at banks, or life insurance premiums of more than Rs 50,000 a year.
There are seven categories of transactions where third-parties like banks, mutual funds and insurance companies have to report transactions by individuals to the income-tax department. For instance, if you deposit Rs 10 lakh or more in a year, the bank concerned will have to report it to the department. The department will then use this information to see if the assessee concerned files accurate returns.
A company issuing credit cards where payment against bills exceeds Rs 2 lakh in a year for a person also has to report this to the department. Similarly, mutual funds collecting Rs 2 lakh or more for sale of units by one person, companies receiving Rs 5 lakh or more against issue of shares, bonds/debentures and registrar/sub-registrars in respect of sale/purchase of immovable property exceeding Rs 30 lakh, and the Reserve Bank of India for issue of bonds exceeding Rs 5 lakh, have to report the transactions to the department.
"The move will definitely have some deterring impact on flow of domestic black money," said Rahul Garg, leader, direct taxes, PwC.
Rakesh Nangia, managing partner, Nangia and Co, said tackling of black money was a serious challenge for the government. "It is a much bigger issue domestically. The move on rationalisation of transactions and the limits will definitely address the issue to some extent," he said.
Recently, the authorities took various measures to deter those involved in circulation of black money. For instance, targeting domestic flow and generation of black money in the mining sector, CBDT instructed income-tax officials to scrutinise production details and tax returns filed by the companies engaged in mining activities, and to take appropriate action in case a discrepancy was found.
Finance Minister Arun Jaitley had pointed out in a Facebook post last month that the bulk of black money was still within India. There was a need to change the national attitude, so that plastic currency became the norm and cash an exception. "…the government is working with various authorities to incentivise this change," he had said.
Targeting the black money stashed abroad by Indians, the government had provided a three-month compliance window that ended on September 30.
During this period, declarations worth Rs 4,147 crore were made. The government later warned of stringent action against those having black money abroad on account of improved information exchange provisions with various countries.
LENS ON DOMESTIC CASH FLOW
Moves on anvil to check flow of unaccounted money
QUOTING OF PAN
Current rule: Mandatory for sale or purchase of any immovable property valued at Rs 5 lakh or more; purchase of any motor vehicle; payment of bills exceeding Rs 25,000 in one go at hotels and restaurants
Likely change: Lowering of thresholds for mandatory furnishing of PAN card where they are too high; increasing the limits where they are too low; adding new items to the list of transactions where furnishing of PAN is mandatory
ANNUAL INFORMATION RETURNS
Govt will expand the list of third-party sources for mandatory reporting (seven sources at present)
