Verify every return: ICAI

The Institute of Chartered Accountants of India (ICAI) wants the tax department to verify every income-tax return saying that 98 per cent returns are never examined. The work, it says, can be outsourced without compromising the confidentiality of data.

"The finance minister should use the Tax Information Network (TIN) to widen the tax base. For example, the tax department can track people who are out of the tax net by asking banks to furnish details of bank accounts for which PAN details have not been submitted but their balances are above a certain limit," Kamlesh Vikamsey, president, ICAI, said while discussing the institute's pre-Budget memorandum, which was recently submitted to the government.

ICAI has suggested that the technical study of every return should verify computation and cross-check the information available in the TIN to check if a case should be taken up for scrutiny. The institute also said businesses which were required to pay the VAT should be asked to file returns irrespective of income.

"This will bring more people under the eyes of the tax department and strengthen its information network," Vikamsey said. The institute has also proposed that agricultural businesses of corporates be taxed.

Reiterating its demand that educational institutes be taxed, ICAI has suggested that Human Resource and Development Ministry allow entities other than trusts to run educational institutes.

"While the trusts get exemption from tax, they are not allowed to distribute income. This results in irregularities as managements show personal expenses as office expenses", Vikamsey said.

"The case of Escort hospital is an example of businesses willing to give up the charitable structure for a corporate structure. This allows more flexibility in use of funds, ' Ved Jain, chairman of the fiscal law committee at ICAI said.

The ICAI has also proposed that the Fringe Benefit Tax (FBT) be retained but instead of quarterly payments, FBT payments be aligned with advance tax, which is paid in three installments.

It also wants that the rate for fixing the value of the fringe benefit be rationalised to 20 per cent. It has also suggested that the assessee should have the option of computing the actual FBT instead of paying it on a presumptive basis.

On service tax, the institute wants the basic threshold limit hiked to Rs 10 lakh from Rs 4 lakh. It has suggested that the government bring all services under the net and prescribe a small negative list, if needed.