News

21st June, 2006

Taxman to mount vigil on professionals

Partnerships and proprietary concerns, too, will be asked to detail their annual income and spend

The salaried taxpayer perturbed by the new income tax return form (Form 2F) which requires her to quote all receipts and expenditure details may not envy anymore the professional or small-time businessman devoid of such travails. A clutch of categories of assessees who dont have to get statutory audit done on their tax returns at present, are going to be asked for such elaborate information soon.

According to official sources, the finance ministry, keen to increase its vigil on the cash economy, will soon modify the format for filing of tax returns by professionals as well as partnership and proprietary firms.

If the proposal materialises, retailers with annual turnover of up to Rs 40 lakh and professionals with gross receipts less than Rs 10 lakh a year would be required to include a cash flow statement in their tax returns. At present, both these groups are not required to keep books of account.

Lawyers, doctors, engineers, architects, technical consultants, accountants and film stars would be impacted by the move.

In addition, many other groups of assessees who are outside the statutory audit but required to quote the permanent account number in certain transactions would also be gradually shifted to the cash flow information system, the sources said.

TAXING TIMES
Finmin will modify the format for filing of returns by professionals, partnership and proprietary firms soon
Retailers with annual turnover of up to Rs 40 lakh a year will be required to include a cash flow statement
Lawyers, doctors, engineers, architects, technical consultants and film stars will be impacted by the move

Through Form 2F, the government recently introduced cash flow statement in tax return format as an option for salaried people with no business, agricultural or professional income.

The new format is optional till July 31 and will be mandatory thereafter. The cash flow statement, of course, is optional for the current year.

Explaining the rationale for the plan to extend cash flow statement to more categories, said a senior official , Unlike in many developed countries like the US, where the social security net provides as a taxpayer identification source, India is mostly a cash economy, which makes keeping a tab on cash flows important.

The official said that with the annual information return (AIR) system to track high value spending in place, the government would have to ensure that the assessees expenditure patterns is broadly in sync with their resources.

The idea is to reduce the interface between the taxman and the taxpayer by facilitating back-office, electronic processing.