House panel for measures to avoid tax harassment

The Parliamentary Standing Committee on finance has recommended that the government modify the provisions relating to filing of annual information returns to avoid harassment of honest tax payers.

It has also asked the government to expedite the recovery of tax arrears and target those who opted for the voluntary disclosure of income scheme, but are not filing returns.

There were 4,868 cases, where arrears demand in each case was Rs 1 crore and above, amounting to Rs 68,477 crore till March 2003, the committee said in its report tabled in Parliament yesterday.

The committee has noted that 78 per cent of the tax revenue is locked up as arrears are from just 400 cases, which indicates the concentration of disputes with a few. "There should be no difficulty in realising the amount of Rs 17,000 crore, which is undisputed," it said.

The committee also pulled up the finance ministry for a reduction in the tax-gross domestic product (GDP) ratio to 9.2 per cent in 2003-04 from 10.1 per cent in 1990-91, on account of decreasing tax rates and non-recovery of arrears.

The ratio, however, increased from 8.2 per cent in 2001-02 to 8.8 per cent in 2002-03, and further to 9.2 per cent last fiscal.

It pointed out that one of the reasons for the low tax-GDP ratio was the large number of prospective tax-payers were yet to be trapped and brought under the tax net. Referring to the FRBM Act, the committee said even countries like Brazil, which is at par with India, had doubled the tax-GDP ratio.

"It is noticed that only a few thousand tax-payers file their returns with income above Rs 10-25 lakh, though it is a frequent phenomena that lakhs and sometimes crores of rupees are spent lavishly on social occasions like marriages," the committee said, adding more revenue could be mopped up if steps were initiated to tap such resources.

Five crore income tax assesses have to be covered in 2004-05. The committee also said the government should expedite the process of covering all the services except a very few basic and essential services, under the tax net.