Thinking of Evading Income Tax amidst the Pandemic? Beware!
Listen to Thinking of Evading Income Tax amidst the Pandemic? Beware!
00:00
00:00
The year 2020 has been a pandemic-hit year. The spread of coronavirus not only affected life in general but also the tax revenue of the government to a large extent.
That being said, the rebound in economic activity seen over the last few months now (after phase-wise unlocking and easing COVID-19 restrictions), appears to be helping the government shore up tax revenues.
The Advance Tax collection -- which includes corporate and personal income tax -- stood at Rs 1.41 trillion during the quarter ended December 2020, a rise of 50% compared to the corresponding period last year. For the first nine months of the financial year 2020-21, the Advance Tax collection was at Rs 2.99 trillion (a 6% decline year-on-year).
The net Direct Tax collection, which includes the Advance Tax, however, is still down 13% compared to the last financial year at Rs 5.89 trillion. This collection is reportedly just 45% of the target of Rs 13.19 trillion estimated in the Union Budget 2020-21.
Amidst the COVID-19 pandemic if you are evading tax, think again! To meet the direct tax revenue target, the Income Tax Department is going after tax evaders.
Although 71% of 5.25 crore taxpayers have already filed their returns for FY20, the tax department has been working hard to ensure that tax evaders don't escape.
(Image source: rawpixel.com)
The Income Tax Department is serving notices to those dodging tax and has launched a nationwide campaign to identify people who have preferred to ignore the notices. The Income Tax Department is watchfully enquiring and verifying returns to nab tax evaders to collect tax dues and even penalise them.
Do you know, despite the Income Tax Department sending repeated reminders through SMSes and emails, the evaders have been disregarding to respond for months now on the pretext of the pandemic?
As per the media reports, the Income Tax Department has identified 6,000 such cases. And ironically, the declared incomes of a few of them are below Rs 5 lakh while their bank accounts have recorded cash transactions in several crore Rupees.
Perhaps what tax evaders are forgetting is that the Income Tax Department is now well-equipped with technology.
[Read: How the New Tax Reform Would Help IT Department Identify Tax Evaders]
The Income Tax Department has employed futuristic technologies such as Artificial Intelligence (AI) and Big Data to identify tax evaders.
The taxman is also tracking the social media activity of taxpayers to find out if there's any disconnect between assessees' lifestyle and their declared income.
Moreover, the use of machine learning and data analytics is facilitating the Income Tax Department to create a comprehensive profile of assessees in its database, which includes: business intelligence, geographic information, asset details, and relationship details amongst others.
A few months ago, the format of Form 26AS was also changed to include, additional details on taxpayers' financial transactions as specified in the Statement of Financial Transactions (SFTs) -- under Part E of the form -- to make it even more difficult for defaulters to get away with tax evasion.
To track high-value transactions, the Income Tax Department is relying on reports sent by third-parties with whom you have transacted (directly or indirectly). High-value financial transactions may include:
-
Hotel bills worth Rs 20,000 or more in a financial year
-
Education fee/donations of Rs 1 lakh or more during the financial year
-
Payment of property tax of Rs 20,000 or more during the financial year
-
Purchases of white goods including marbles, paintings etc. worth Rs 1 lakh or more
-
e-payment of credit card bills Rs 10 lakh or more on an aggregate basis and payment of over Rs 1 lakh made in cash during the financial year
-
Electricity consumption worth Rs 1 lakh or more during the financial year
-
Payment of Rs 20,000 or more for Health Insurance Premium during the financial year
-
Payment of Rs 20,000 or more for Life Insurance Premium during the financial year
-
Cash deposits in savings account worth Rs 10 lakh or more during the financial year
-
Cash Deposit or Withdrawal worth Rs 50 lakh or more from one or more Current Accounts in a financial year
-
Term Deposits with banks worth Rs 10 lakh or more in a financial year
-
Deposits/Credits worth Rs 25 lakh or more in a non-current account in a financial year
-
Deposits/Credits worth Rs 50 lakh or more in a current account in a financial year
-
Investments of Rs 10 lakh or more in mutual funds/shares/bonds/debentures during the financial year
-
Purchase of Foreign Currency Rs 10 lakh or more in a financial year
-
Investment of Rs 30 lakh or more in immovable property (viz. land, house, apartment, commercial premise) in a financial year
-
Air travel fare paid in a financial year (irrespective whether domestic or foreign travel and the fare paid)
So, note that evading tax for such individuals is not going to be easy and the imposition of the penalty would be pretty hefty.
Do not take the newly introduced faceless assessment process of the tax department lightly. The Central Board of Direct Taxes (CBDT) has assigned nearly two-thirds of its workforce on faceless assessments.
The Income Tax Department is sparing no one. Recently, it exposed the tax evasion of over Rs 700 crore after it conducted raids on a Chennai-based, Chettinad Group. The 100-year old group is indicted of overstating its business expenses and depreciation to conceal profits and evade tax.
The CBDT has already made it amply clear that it intends to honour the honest taxpayer but the defaulters and tax evaders might have to face the music.
You see, legitimately save tax by engaging in prudent tax planning exercise rather than simply evading it. The CBDT, recognising the hardships caused by the COVID-19 pandemic, extended the last date to file the ITR for the financial year 2019-20 to December 31, 2020 (from July 31, 2020). Make sure you file you ITR truly before the due date.
Here are eight great benefits of paying all tax dues and filing tax returns on time:
-
Faster processing of returns
-
Quicker refunds
-
You get time to get all your documents in order
-
You avoid late payment and penal interest
-
Allows for carry forward and set off of losses
-
Faster processing of loans, visas and credit cards
-
Eliminates errors
-
Eliminate stress
Paying taxes is not only your legal responsibility but also a moral duty. File your Income Tax Return (ITR) honestly. It earns for you the dignity of consciously contributing to the development of the nation. Besides, legitimately filing ITR validates your creditworthiness before financial institutions.
Efficient tax planning is the way to go.
"In this world, nothing can be said to be certain, except death and taxes." - Benjamin Franklin
Warm Regards,
Rounaq Neroy
Editor, Daily Wealth Letter
PS: If you wish to select worthy mutual fund schemes, including the tax-saving ones -- known as Equity Linked Saving Schemes -- I recommend that you subscribe to PersonalFN's unbiased premium research service, FundSelect.
Additionally, as a bonus, you get access to PersonalFN's popular debt mutual fund service, DebtSelect.
PersonalFN recommendations go through our stringent process that assesses both quantitative and qualitative parameters, providing you with Buy, Hold, and Sell recommendations on equity and debt mutual fund schemes.
If you are serious about investing in a rewarding mutual fund scheme, Subscribe now!
Join Now: PersonalFN is now on Telegram. Join FREE Today to get ‘Daily Wealth Letter’ and Exclusive Updates on Mutual Funds