The government wants banks, insurance firms, jewellers and others to report 11 transactions to the income tax department. In a move to catch tax evaders, the government wants disclosure of certain transactions, not by the tax payer but by the firms they deal with. Will this nudge the unwilling to pay their taxes? In this special series of Money with Monika, personal finance expert Monika Halan explains how the new notification works. Watch the full episode for Monika Halan’s advice. Monika Halan is consulting editor, Mint, and author of the book ‘Let’s Talk Money’.
A tweet from a government handle, now deleted, was the cause of much upset with social media going a little nuts on the increasing compliance burden on the Indian taxpayer and the increasing intrusion of big government into citizens’ lives. The tweet lists 11 categories of financial transactions that, if made, will trigger reporting by the receiver of the money to the income tax department. Already banks and mutual funds report transactions above a certain threshold. The scope of this reporting is set to expand.
The shops, banks, mutual funds, hotels and so on will make the disclosure to the tax department, and not the taxpayer. The government hopes to find a discrepancy between the income disclosed during the tax filing process and the spends made. As we file our tax returns for financial year 2019-20 (last year), we will see a box that only some people need to tick. These are people who claim that their gross taxable income (before applying any deductions) is ₹2.5 lakh or less, but have made transactions of ₹1 crore or more in a current account, have paid ₹1 lakh or more in electricity bills and have spent ₹2 lakh or more on foreign travel. We see these people around us, they are the ones pulling out wads of cash to pay for high-value gadgets, jewellery, hotel bills and more. They are the ones paying 50-70% of property purchases in cash.