Centre likely to intensify exercise against income tax evaders

The government may intensify its exercise to identify people who undertake high-value financial transactions, but avoid filing tax returns, officials aware of the development said. The move comes despite the government expecting robust income-tax collection in the financial year, as it wants to widen the tax base, which is a mere 81.3 million.

The Central Board of Direct Taxes (CBDT) uses artificial intelligence and data analytics to detect cases of tax evasion. It might also deploy the non-filers monitoring system (NMS) to nudge people to file their income-tax returns, the officials said, requesting anonymity.

“It is surprising that in a country of over 1.3 billion people, only 81.3 million paid income-tax in AY (assessment year) 2020-21. The number of taxpayers in the upper slabs are even narrower. In this digital age, detection of tax evasion is not very difficult,” one of the officials said, adding that some of the tools include statement of financial transactions, tax deduction at source, tax collected at source, details of foreign remittances, trade data and NMS.

The government has so far used 10 cycles of NMS since 2013, which identifies and monitors persons who enter into high-value transactions and have potential tax liabilities, but not filed tax returns. “The move is also as per the directive of the political leadership,” the official said, referring to Prime Minister Narendra Modi’s speech on February 12, 2020.

“In our country great doctors, lawyers, chartered accountants, and a number of professionals who are proficient in their respective fields, are serving the nation. But it is also a fact that there are only 2,200 professionals in the country who declare their annual income to be more than ₹1 crore,” Modi had said.

CBDT did not respond to an email query on this matter.

“In last two cycles… NMS-9 and NMS-10 pertaining to flagging of non-filers for the assessment year 2019-20 and 2020-21, a total of 4,017,235 cases have been flagged, out of these 1,069,186 taxpayers have filed returns and a total of ₹7,318.65 crore has been collected as self-assessment tax,” junior finance minister Pankaj Chaudhary told Parliament on February 7.

“The income-tax department enables e-verification of all such NMS cases for ease of compliance by soliciting taxpayers’ response online as physical presence is not required,” a second person said.

People who do not file tax returns are asked to assess their tax liabilities for the given assessment year and either file returns or submit an online response within a stipulated time, which is generally three weeks. In case of no response, the department may initiate proceedings as per the law.

As on mid-March, over 6.63 crore tax returns have been filed for assessment year 2021-22, which shows less than 3% growth compared to the same period the previous year, according to latest official data.

The number is expected to rise as the last date of filing returns, revised returns, linking of Aadhaar and PAN, and compliance to e-proceedings for assessment is March 31.

The net direct tax collection up to mid-March for financial year 2021-22, however, showed over 48% jump at ₹13.63 lakh crore, compared to ₹9.18 lakh crore in the corresponding period of the preceding financial year.

The net direct tax collection of ₹13,63,038.3 crore on March 16 include corporation income-tax at ₹7,19,035 crore and personal income-tax, including security transaction tax at ₹6,40,588.3 crore, according to CBDT. The net collection in 2021-22 so far is over 9% higher than the revised estimate of ₹12.50 lakh crore.

The gross direct tax collection before adjusting refunds, for 2021-22 was ₹15,50,364.20 crore on March 16, compared to ₹11,20,638.60 crore in the corresponding period of the preceding financial year.