Govt to levy penal interest rate on tax defaulters
January, 21st 2013
The government is likely to clamp down heavily on tax defaulters through a string of measures that is likely to be announced in this year's budget, as tax authorities step on the pedal to collect unpaid revenues.
The government is likely to impose an interest rate of about 24% on outstanding arrears of tax defaulters, sources said. These, along with other steps, are in line with the recommendations made by a panel headed by former finance secretary Vijay Kelkar on fiscal consolidation.
The Kelkar committee had recommended that companies found to be defaulting on tax payments should be asked to pay the overdue tax with an interest rate that is four percentage points higher than the market rate.
The current market rate of interest for defaulting companies is generally as high as 18% to 20%. If we assume a penal component of 4%, the interest rate for default in payment of tax should be in the range of 22% to 24%.
The tax department is learnt to be collating data on companies that have claimed to have deducted tax but not paid it to the government.
The tax department is collecting this data by sifting through income tax returns and tax deducted at source declarations of individuals and companies.