Tax dept looks to augment revenue from top business houses
May, 29th 2015
The tax department is going to closely monitor 6,000 top corporate cases of scrutiny, which account for at least 90% of the total corporation tax collection in the country, as it looks to augment revenue from top business houses.
In addition, it intends to identify business houses where the department suspects tax evasion or underreporting of revenue to bolster its collections. And, special attention is being given to large clubs, which have caught the attention of the tax department. In a strategy paper discussed at the two-day conference of chief commissioners earlier this week, it has been suggested to look at prominent clubs which have large amounts lying in fixed deposits and earn big money by renting out rooms.
The document, which is discussed to work out an annual plan, clearly mentions that the focus will be to clamp down on tax evaders and widen the tax base.
In addition, there is a reiteration of some of the points that were made in earlier years. For instance, the tax department plans to levy tax on unsold flats held by real estate companies by treating them as 'income from house property' even if they are not rented. The move was first reported by TOI on July 30, 2014.
The move, may believe, could result in pressure on real estate developers to cut down prices. One of the reasons for large inventories in the real estate sector is top builders holding on to their unsold stock for long and not letting the market determine the price. So far, unsold projects of builders were exempted from income tax under 'stock-in-trade' category. The I-T department believes builders will release more flats into the market if they have to pay tax on them.
Taxing the unsold stock of builders will be on the basis of notional annual letting value, forcing real estate players to either sell their unsold flats at market-determined price or pay tax which will further affect their bottomlines.
The I-T department is confident of collecting significant revenue by taxing unsold flats as it is estimated that there are more than 1 lakh ready flats in just eight mega cities. A few years ago, when there was an attempt to tax such unsold stock, the builders had moved court. However, the court gave a judgment in favour of the department in 2012.
The court had validated the I-T department's argument that builders will have to pay tax based on annual letting value method, irrespective of the fact that these flats were not rented out. The department has now decided to levy this tax uniformly across the country after the proposal was cleared by the finance ministry.