Tax officers are intensifying efforts to enforce businesses’ obligation to deduct tax at source (TDS) and pay the same to the government on schedule as part of a drive to widen the direct tax base and keep tax collection a less intrusive affair.
Field officers of the income tax department are taking a series of steps including spot verifications, launching prosecutions for lower deductions and closer monitoring of payments made to foreign entities to enforce compliance. Tax deducted at source accounted for more than 40% of the ? 10 trillion gross direct tax revenue in FY18.
The government is keen to step up direct tax revenue as it will go a long way in lowering the tax rates in lower income brackets.
A new direct tax code, which is currently being prepared, is pursuing this.
In Delhi alone, more than 150 prosecution proceedings have been launched from April to July period of 2018, said a statement from office of principal chief commissioner of income tax, Delhi.
Delhi has the highest number of applications in the country from TDS defaulters who compound their offence by paying additional fee and avoid prosecution, said the statement.
“TDS wing of the Income Tax Department, Delhi is taking strict action against such deductors who do not comply with the TDS provisions and divert the tax deducted for their business activities or any other purpose for which they are the custodians of the government dues,” said the statement.
Businesses are required to remit to exchequer the tax deducted in a particular month within the first week of the next month.
Enforcing compliance of TDS provision is a priority for the Modi government as it has a direct bearing on tax revenue. TDS is also a non-intrusive mode of tax collection as the onus of payment lies with the entity that makes payment to the income earner.
The Central Board of Direct Taxes (CBDT), the apex direct tax policy making body, earlier this year asked field officers to pay special attention to TDS compliance and set a target of at least 10 surveys (visit to taxpayers’ premises) a year for assessing officers in charge of TDS compliance. The other key targets given to tax officials are in the areas of gross tax collection, increasing the number of tax return filers, recovery of tax dues and clearing appeals from tax payers.
One factor that helped the authorities in boosting direct tax collection is the increased surveillance from linking Aadhar to Permanent Account Number (PAN) and to bank accounts as well as the data on sales reported by businesses to the Goods and Service Tax Network (GSTN), the IT backbone of the new indirect tax system.
Increased use of information technology in taxation has enabled the direct and indirect tax authorities to work closely in checking evasion. CBDT has a target of ?11.5 trillion gross tax receipts in FY19, 14.6% more than what it collected last fiscal.