Finance ministry officials have refuted media reports that claimed that government was considering modification of income tax returns forms for an expansion of statement of financial transactions (SFT) to ensure that the high value financial transactions are filled in the ITR by the taxpayers themselves.
The officials called the reports “totally misleading”, while clarifying that the taxpayer doesn’t need to mention high value transactions in the return filed and reporting of such transactions will only be done in the most non-intrusive way by the third parties under the Income Tax Act.
Further clarifying, the official said that reporting of high value transactions is done chiefly for identifying people spending big bucks on luxuries such as business class air travel, foreign travel, expensive hotels, expensive schools and yet not paying taxes claiming to be earning less than Rs 2.5 lakh per annum and also for identifying those under reporting their earnings.
The chief purpose is to attain the widening of the tax base in a country where only a fraction of the population pays taxes, a fact highlighted by Prime Minister Narendra Modi while launching ‘Honoring the Honest’ taxation platform on August 13. The exercise of collective information on high value transactions from third parties is in line with the government’s stated principle of honouring the honest, the official said.
“The Income Tax Department is relying more and more on voluntary compliance and therefore it has become essential to identify tax evaders and for that purpose expenditure data collected from third parties through SFT is the best and most effective non-intrusive method. Any purported extension in the present list of SFTs, as reported in the media, is certainly not going to impact or affect the taxpayers as they are not required to file details of high value transactions in their ITRs,” the official said.
The official added that the information will be used to identify those who are either not filing the returns or the income disclosed in the returns are not proportionate to the pattern of expenditure reported in the SFTs. Such exercise will be done through data analytics and artificial intelligence. There will be no manual intervention in such exercise.
The official stressed that with the changing facets of taxation in India towards a faceless approach, it has now become even more imperative for the I-T Department to have broader SFT reports by third parties about those persons who undertake high value transactions but still do not pay income-tax.
Identifying such persons evading tax is important for delivering justice to the honest taxpayers and the widening of the tax base will allow government fiscal space for lowering the tax burden of the honest taxpayers.