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Small companies have a much higher tax liability, says CBDT head
August, 20th 2016

The government is working towards increasing the taxpayer base, as well as curbing the use of black money. For this, the tax department is already reaching out to people, and the younger generation is already adapting to the change, CBDT chairperson Rani Nair told HT. Excerpts from an edited interview.

The on-going black money declaration window has seen a lukewarm response.

In the initial months, the emphasis was on outreach programmes, educating and telling the benefits of the scheme that accrue to taxpayers. As we approach the end of the scheme (around 40 days are left), we are seeing interest from people. We have issued a series of FAQs, and will come out with another set of clarifications this week. Since this is a voluntary scheme we have to wait for it to get over to assess its success.
There have been a lot of measures earlier to curb black money, but they have not yielded desired results.

A lot of work has been done in the recent past to curb black money — PAN disclosures for various transactions have been made mandatory, 1% tax collected at source (TCS) has been levied for cash transactions exceeding ?1 lakh and Benami Bill has also been cleared by Parliament, among others. Even GST will help curb black money as it will bring unaccounted transactions under a tracking system. Black money is a social evil, so there is need to change the mindset of people. The younger generation is already adapting to this change, they do not want to use cash for transactions, they want to use cards and avail benefits of electronic payments.

The CBDT initiated the drive, PAN for all, last year. What is the current status?
We have issued over 25 crore of PAN card already. We have made PAN application process completely online. For new PAN-related measures, you will have to wait for the Budget to spell it out. The use of PAN will make it difficult for black economy to exist in the country. We have also started looking into non-PAN data of high-value transactions to identify potential non-filers or tax evaders.
The department is yet to issue a roadmap for corporate tax reduction.

Today, more than the large corporate houses, it is the small companies, which have a much higher tax liability — around 28% to 29%. In Budget 2016, the finance minister announced measures to bring down the tax liability of smaller companies. The roadmap is clear and we will slowly phase out the exemptions. All new companies can opt for 25% tax rate without claiming exemptions.

Can we see a further reduction in the upcoming Budget?

Let the Budget process start in September. The finance minister has already announced the roadmap and we will work towards it.

Finance Minister has been indicating that the burden of personal tax on middle class needs to be reduced, but it can be done once tax base is enhanced, what is the philosophy of the department?

I do not think that the personal income tax slabs, or the rates, need to be tweaked. Both have been well placed given the economy and the tax payers of the country. When it comes to the agenda of increasing the tax base, then yes, there’s work that we have been doing, and we will be doing in the future also. Studies conducted say that the tax base, which is missing right now, is from the lower income groups. We through our various information gathering tools -- third party information, annual information report, bank transactions and data and non-filers mechanism, have been identifying people who are escaping tax filing, or are evading taxes by less declarations. We are sending them notices and are asking them to either come clean and start filing the returns and pay taxes, or they should be ready to face action under the Income Tax Act. We are working towards widening and deepening of tax base.

PM Modi has sought to double the taxpayer base to 100 million. By when is it possible?

We cannot have a set date for this, but the department is working towards it. Last year, 45 million people paid taxes. This year till date, 22.7 million returns have already been received, which is 9.8% higher than the same period of the previous year.

The tax base for direct taxes has grown to over 60 million, which includes tax return filers as well as those whose tax has been deducted at source.
A huge number of corporate entities are enjoying a free ride of tax exemptions int he garb of agriculture income, what is the view of the department?
This is a constitutional issue. This proposal needs constitutional amendment.

Under the dispute resolution window, are Cairn and Vodafone likely to take the benefits?

We have clearly said that these are voluntary schemes. It is for them to decide. If they don’t take the benefits, they will be liable to interest, penalty, etc.
On international tax treaties, after Mauritius and Singapore, which are the other countries where these will be revisited?

We are in dialogue with Cyprus and Singapore.

As more and more countries sign up for automatic exchange of information, do you see less instances of parking black money in tax havens?
Automatic exchange of information across jurisdictions should deter people from using low tax/ no tax jurisdictions for illegitimate purposes.
What is the status of investigations under the Panama papers leak case?

A multi-agency group (MAG) has been constituted by the government representing CBDT, ED, FIU, RBI, etc. and investigations are underway.

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