STT, wealth tax evaders in trouble

All returns for securities transactions tax filed in '04-'05 to be examined.

There's bad news for stock brokers who evaded or under-paid securities transaction tax in 2004-05.

The Central Board of Direct Taxes (CBDT) has decided to examine all returns filed in respect of taxable securities transactions for the year 2004-05.

The tax department is also tightening the noose around evaders of wealth tax. In addition to issuing scrutiny guidelines for securities transaction tax (STT), it has issued separate scrutiny guidelines for wealth tax.

The move has been prompted by a continuous decline in the number of wealth tax assessees, presently pegged at just one lakh.

According to guidelines for the STT, the CBDT has asked chief commissioners that all STT returns be picked up for detailed investigation under Section 102 of the Finance Act, 2004.

STT returns are filed by stock exchanges and mutual funds, detailing the volume of security transactions and the tax paid. The first return of taxable STT for the financial year 2004-05 was due in June 2005.

The STT rates range from 0.017 per cent on transaction of derivatives to 0.25 per cent on the sale of units of an equity-oriented fund to a mutual fund. The government had mopped up over Rs 2,500 crore as STT in 2005-06.

Officials said the decision to issue separate scrutiny guidelines for wealth-tax cases was due to stagnation in wealth-tax collection, which stood at around Rs 145 crore annually.

"There is a view that a large number of taxpayers are either not filing their returns of wealth or not disclosing their true taxable wealth," an official said.

Rahul Garg, executive director, PricewaterhouseCoopers, said the guidelines for wealth tax appeared to be an attempt to co-relate the income of a taxpayer with his asset position, since a taxpayer is not required to file the details of his assets in his income tax return.

The government has estimated wealth-tax collection at Rs 265 crore this fiscal.

The tax is charged at the rate of 1 per cent of the amount by which net wealth exceeds Rs 15 lakh on unproductive assets such as residential houses, farm houses, urban land, jewellery, bullion, motor cars, planes, boats etc.