Making a case for increasing the taxpayer base, Finance Minister Arun Jaitley has said the government's intention is to keep taxation rate "moderate" and emphasised that tax department needs to start trusting the assessees.
He also said that all grey areas are being made clearer when it comes to taxation and the tax department.
"Ease of communicating with tax department is going to continue. All the grey areas, the unclear areas I think by virtue of clarifications and notifications are now increasingly becoming clear," Jaitley said.
In the last few months, procedures have been simplified and the "assessees have never seen such an easy and friendly approach of the taxation department", he noted.
His remarks also come against the backdrop of various initiatives being taken to ensure that the taxation system becomes more friendly towards taxpayers. Listing out various measures aimed at simplifying the procedures, Jaitley said dispute resolution mechanism has been put in place at the appeals stage with respect to tax matters.
Participating at a programme jointly organised by the Institute of Chartered Accountants of India (ICAI) and the Finance and Commerce and Industry Ministries on Saturday, Jaitley said the tax rate would be reasonable while the tax base has to be much larger and "the tax department has to start trusting the assessee and the taxpayer".
In a strong message to those evading tax, Jaitley said such people would face serious action and that the government is plugging the escape routes.
"Those who were involved in the Liechtenstein accounts, those who are involved in the HSBC accounts and which were held to be illegal, are now facing prosecution. Those holding illegal accounts as disclosed in the Panama papers will also meet the same fate. We have revised our (tax) treaty with Mauritius so that there are no such routes available where people get away with earning income in India and not paying taxes.
"So, investors and taxpayers are going to be taxed on the basis of residence-based principles," Jaitley said.
According to him, Cyprus treaty has also been revisited and is likely to be approved by the Cabinet over the next few days. The government is also in discussions with Singapore for revising the bilateral taxation treaty.
"What stems out of this is that every income earned in India unless exempted would be liable for tax in India, the escape routes against that are now being blocked. But our tax rate will be reasonable, base has to be much larger and the tax department has to start trusting the assessee and the taxpayer," he said.
Currently, the country has a taxpayer base of about 5.4 crore people.
The awareness programme on the Income Declaration Scheme, 2016 saw Jaitley addressing ICAI members, including its President M Devaraja Reddy, President and CBDT officials, among others, through video conferencing.
About the Income Declaration Scheme 2016 - which can be availed till September 30 - Jaitley said it provides a good opportunity for anyone to disclose domestic income for which filing has not been made before.
"Once a return is filed, the source of income is not going to be questioned. Whatever disclosures are made they are not going to be used for any other collateral purpose or be shared with anybody... Confidentiality will be respected," he added.
The scheme, which opened on June 1, allows domestic black money holders to declare their ill-gotten wealth by paying a tax and penalty totalling 45 per cent.
"Effective rate of taxation has become very reasonable and such an opportunity may not visit an assessee ever in future again where he will get the opportunity to pay taxes, a nominal penalty and convert all his assets to be tax-compliant," Jaitley said.
Compared to many other economies, India's tax rates are competitive but the tax base has to be much higher, he added.
"Our intention today is that the number of assessees in the country should be increased. Today the number of people who file their returns and who come under TDS network is approximately 5.40 crore. In order to become tax compliant, it is necessary that nobody possesses income or asset outside the assessment. Therefore, this is a great opportunity for all taxpayers to avail this declaration scheme," Jaitley said.
Noting that the government has every intention to keep the taxation at a moderate rate, the Finance Minister said, gradually the corporate tax would be brought down to 25 per cent so that all companies have surplus income which they can reinvest and increase economic activity and employment in the country.
Speaking on the occasion, CBDT Chairman Athulesh Jindal said the ongoing disclosure and declaration scheme is not an "immunity scheme" and that any comparison with previous amnesty schemes would not be correct.
Jindal noted that in the last two years, more than Rs 40,000 crore of undisclosed income has been detected.
"The aim is to make the cost of tax evasion very high... Over the last two years, undisclosed income of more than Rs 40,000 crore has been detected as a result of search and seizure operations and surveys. Prosecutions were also launched in 1,220 cases over the last two years," he said, adding that information sharing mechanism is also being strengthened.
According to him, after signing of FATCA with the United States, information flow from there has started. "We are scrutinising the voluminous information received and effective utilisation of this information will be ensured," he added.
The awareness programme was webcast live to more than 100 branches of the ICAI and was attended by around 15,000 citizens including Chartered Accountants, company secretaries, and advocates.