‘Opens door to tax terrorism, increases compliance burden’ — Few takers for new I-T proposal

Representational image | Dhiraj Singh | Bloomberg

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New Delhi: Analysts and the opposition have raised concerns over the income tax department’s proposed move to expand data collection — by including purchases of jewellery, white goods (ACs, washing machines etc) and paintings, and hotel spends, among other things — saying it flies in the face of the Modi government’s promise of a simple tax regime.

They have said the proposed framework will add to the compliance burden of firms, with the opposition going a step further and saying this opens the door for “tax terrorism”.

The I-T department is looking to include more things under its transaction-reporting framework — this means financial institutions and other firms will have to report more transactions above prescribed thresholds to the tax department.  

Aimed at widening the tax base, the proposal seeks to make several additions to the framework — purchases of jewellery, white goods, marble and paintings, annual education fees and donations worth over Rs 1 lakh, and domestic business class and foreign travel. 

Other items proposed for inclusion are hotel bills of Rs 20,000, life insurance premiums of over Rs 50,000, health insurance premium and property tax payment of more than Rs 20,000, and electricity consumption of above Rs 1 lakh/year. 

All these transactions will be in addition to existing reporting requirements for banks and other financial transactions relating to high-value cash deposits in current and savings accounts, besides purchase of bonds and debentures and payment of credit card bills. Clarity is however awaited on whether it will apply to cash transactions alone or for digital payments as well.   

Also Read: It’s easier to do business under Modi govt, but tougher to file taxes & register property

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