Taxmen to focus on pay and perks of corporate bosses
July, 29th 2014
The tax authorities are keeping close watch on compensation paid to top corporate bosses, including their allowances and perks, and income from your fixed deposits. The income tax department is also launching a city-specific drive focused on certain categories of spending and investment to unearth concealed income and widen the tax base.
So, in Lucknow those purchasing a luxury car or an SUV may have some explaining to do if the income shown in their tax returns is not in line with the high-value transactions. Similarly, in Guwahati high expenses in shopping malls, coaching centres or expensive property purchases may invite the taxman's attention, officials familiar with the exercise told TOI.
The directorate of intelligence criminal investigation, tasked with tracking high-value transactions, has launched the pilot projects across eight cities — which include Bangalore, Kolkata, Chennai, Kochi, Pune and Bhopal — to gather data, which will be shared with other wings of the income tax department to help mop up more revenue.
In Bangalore, for instance, interest from investment in urban cooperative banks or credit cooperative societies is under scrutiny after it emerged that till December 2013, interest income of over Rs 6,000 crore of over 3.8 lakh people had not been assessed by the income authorities as it was not disclosed in the tax returns. Similarly, Kolkata residents who spend on producing films, TV serials or media content are under the lens, while in Kochi, income from house boats and capital gains on land sold to Vizhinjam International Seaport will be studied.
The government's failure to significantly expand the tax base often comes in for criticism, as it results in higher levies from those who are already in the net. If the income of the self-employed and businessmen is accurately reflected, the government will be in a position to offer lower tax rates or more concessions to the salaried, experts often say. Within the salaried category, the strategy discussed with chief commissioners last week also sought to focus on the top companies, including public sector entities, in addition to large employers. The move is part of an exercise to bolster tax deducted at source (TDS), which has emerged as a major source of revenue and information flow for the income tax department. Typically, TDS accounts for over one-third of the gross income tax collections.
As a result the compensation structure of top executives "with a view to examine the nature of allowances/ perks and reimbursements" will be examined, said tax department sources. Officials have also been instructed to clearly check if employees were being passed off as consultants, resulting in lower TDS.
Your interest earnings on bank fixed deposits are the other area of focus as the tax department has noticed that this income is often not shown by holding multiple fixed deposits, each earning interest of less than Rs 10,000. The income also escapes attention as banks have been found to be lax in not deducting tax despite the prescribed forms not being filled up by the depositors.
Tax department officials have also been asked by the top bosses to keep tabs on payments made by educational institutes for guest lectures and also to event managers and medical transcription companies.