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Income Tax Department Cracks Down on Unfiled Returns: 1.52 Crore Individuals Targeted

editor — Mon, 15 Apr 2024 04:21:28 +0000

Large Discrepancy Between Taxpayers and Filed Returns

The Income Tax Department is launching a campaign to target individuals who haven’t filed their income tax returns (ITR) despite meeting filing requirements. According to a report in the Economic Times, the department has identified 1.52 crore such individuals.

Data Discrepancies Trigger Action

This initiative stems from a data analysis by the Central Board of Direct Taxes (CBDT) which revealed a significant gap between the total number of taxpayers (8.9 crore in financial year 2022-23) and the number of ITRs filed (7.4 crore, including revised returns). This suggests that potentially 1.97 crore individuals might not have filed their returns even though tax was deducted at source (TDS) from their income.

Focus on High-Value Transactions

The I-T Department is particularly interested in individuals with high bank transactions linked to their PAN cards. Officials will be contacting these individuals to explain the importance of filing ITRs. Additionally, the CBDT has identified nearly 9,000 potential taxpayers who might have made high-value purchases or cash deposits and will be sending them tax notices.

Consequences for Non-Compliance

Individuals who deliberately neglected to file returns will face penalties. However, those with genuine reasons for the sudden increase in income can submit an explanation or file a return to rectify the situation.

Data Analytics Boosts Tax Collection

The Income Tax Department’s access to a vast amount of data has proven instrumental in identifying non-filers and uncovering inconsistencies. This focus on data analysis is credited with contributing to a significant rise (19.88%) in net direct tax collection, exceeding ₹18.90 lakh crore as of March 17th.

Source: https://www.hindustantimes.com/business/it-department-to-tap-1-52-crore-individuals-for-income-tax-return-filing-heres-why-101713003056572.html

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CBDT Urges Officers to Identify Top 30 Cases of TDS Shortfall by June 30, 2024

editor — Wed, 10 Apr 2024 05:13:23 +0000

The Central Board of Direct Taxes (CBDT) has instructed income tax officers to scrutinize the top 30 cases of insufficient tax deduction at source (TDS) and resolve at least 150 appeals by the Commissioner of Income Tax before June 30, 2024.

These directives are outlined in the interim action plan released by the CBDT for the fiscal year 2024-25, delineating the primary focus areas for field formations.

According to a recent communication from the CBDT to its officials, specific Key Result Areas have been identified for timely accomplishment, alongside attending to statutory limitation matters.

The CBDT routinely issues interim action plans to its officials at the onset of each financial year, refining them later in the year to form the final plan.

Additionally, the CBDT has called for seminars and awareness campaigns to be conducted on TDS. Over the years, TDS has emerged as a significant revenue source for the government, surging from Rs 2.13 lakh crore in FY13 to Rs 8.17 lakh crore in FY23.

As part of its interim plan for the current fiscal, the CBDT has also mandated the immediate approval of all pending refunds withheld under Section 241(A) once scrutiny assessments are completed and requisite orders are passed, either immediately or by April 30, 2024.

Furthermore, the CBDT has directed that all information requested by enforcement agencies such as the CBI, SEBI, and Enforcement Directorate before March 31, 2024, must be shared by the end of April. For requests received after April 1, information should be provided within 15 days.

Field officers are also tasked with identifying cases where seized assets are due for release as per Section 132B and facilitating their release by June 30, 2024.

Source: Business Today

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High Court Advocates Direct Communication, Urges Tax Department to Inform Taxpayers Prior to Action

editor — Wed, 10 Apr 2024 05:01:01 +0000

Introduction:

Certain demographics, including senior citizens, technologically hesitant individuals, Non-Resident Indians (NRIs), and those prone to forgetfulness, might be unaware of the Income Tax Department’s actions against them. The department initiates proceedings by uploading show-cause notices or summons to its online portal, without directly notifying these taxpayers via email or letter. Consequently, individuals who infrequently check the tax portal, as is common, may face unforeseen penalties and complications. This operational method by the tax authorities has raised concerns about its fairness.

High Court’s Critique:

Recently, the High Court criticized the tax authorities’ approach, highlighting the unreasonableness of expecting taxpayers to constantly monitor the e-portal for updates. In a case concerning the Munjal BCU Centre of Innovation and Entrepreneurship, the Punjab and Haryana High Court quashed a show-cause notice from November 2022. The court emphasized that legal provisions dictate the manner in which notices and orders must be served, rejecting the notion of notices being “presumed” received solely by placement on the e-portal.

Importance of Natural Justice:

An expert underscored the significance of natural justice in legal proceedings, emphasizing the principle of “audi alteram partem,” which requires both parties to be heard. Lack of communication regarding assessments, penalties, or other actions could result in hardships for taxpayers, missed deadlines, and ignorance of their right to respond, thereby increasing burdens for all parties involved.

Case Example: Munjal BCU:

Munjal BCU, dedicated to fostering innovation and startups in Ludhiana, received initial notices and reminders solely through the online tax portal. The court deemed this insufficient opportunity for the organization to present its case.

Historical Context:

Before 2009, the tax department primarily relied on physical mail for communication, transitioning to electronic means later. Placing communications solely on the income tax portal can pose tracking challenges, especially for certain demographics uncomfortable with technology. While portal accessibility is convenient, supplementary notifications via email and/or physical mail are necessary.

Expected Changes:

The court’s decision is expected to prompt the department to communicate through emails for various matters, including notices and summons.

Practitioners’ Concerns:

Tax practitioners have noted issues with recent proceedings, including notices not being visible on the portal and unreasonable response timeframes.

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GSTN Issues Important Advisory Regarding Reset and Re-filing of GSTR-3B for Certain Taxpayers

editor — Tue, 09 Apr 2024 12:06:19 +0000

The GSTN has released an important advisory, numbered 629 and dated April 9, 2024, regarding the reset and re-filing of GSTR-3B for specific taxpayers.

Referring to the option for re-filing GSTR-3B for certain taxpayers, it was observed that discrepancies existed between the saved data in the GST system and the data actually filed, particularly concerning ITC availment and tax liabilities. After thorough examination and discussion by the Grievance Redressal Committee of the GST Council, it was decided to reset these returns, providing affected taxpayers with an opportunity to rectify the discrepancies.

As a result, only the affected taxpayers have been notified via their registered email addresses, and the affected returns are accessible on their respective dashboards for re-filing with accurate data. Those who have received this communication are requested to visit their dashboard and re-submit their GSTR-3B within 15 days.

In case of any difficulty in re-filing, taxpayers are advised to contact their jurisdictional tax officer or raise a ticket on the GST grievance redressal portal.

We deeply regret any inconvenience caused to taxpayers.

The complete advisory can be found at: Link to Advisory

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Income tax department cracks down on PAN fraud for false HRA claims

editor — Wed, 03 Apr 2024 06:34:13 +0000

The income tax department has unearthed a scam involving the fraudulent use of permanent account numbers (PAN) to claim house rent allowance (HRA) without actual tenancy. Around 8,000-10,000 high-value cases, each involving amounts exceeding Rs 10 lakh, have been identified so far. The investigation was triggered by the discovery of alleged rent receipts totaling approximately Rs 1 crore attributed to an individual.

Uncovering the deception

Upon interrogation, the individual associated with the PAN linked to the purported “rental income” disavowed any knowledge of the transactions. Subsequent investigations revealed that the individual never received the reported rent payments.

Widespread misuse of PANs

The case prompted a broader probe revealing widespread misuse of PANs by unscrupulous individuals seeking tax deductions from their employers. Instances have emerged where multiple employees from the same company used identical PANs for tax claims. Tax authorities are pursuing these employees to recover the misappropriated tax amounts.

Legal implications and preventive measures

While legal action against the offenders remains uncertain, tax experts warn of potential penalties and prosecution for such fraudulent activities. To prevent such misuse, financial transactions, particularly rent payments, should be traceable and transparent, preferably through electronic means. Employers are advised to implement stringent verification processes to prevent fraudulent claims and to ensure compliance with tax regulations.

Expert insights and employer responsibilities

According to tax advisors, the responsibility primarily rests with the employee, although employers are urged to exercise due diligence in verifying HRA claims. Employers found to have lax verification processes risk reputational damage and may even terminate employees engaged in fraudulent practices.

The case underscored the imperative for vigilance and compliance in financial transactions, particularly in the realm of taxation, to prevent and penalize fraudulent activities.

Source: https://www.indiatvnews.com/business/income-tax/income-tax-department-cracks-down-on-pan-fraud-for-false-hra-claims-house-rent-allowance-authorities-rental-income-financial-transactions-2024-04-01-924080

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Section 194G of the Income Tax Act

editor — Sat, 16 Mar 2024 13:09:34 +0000

Lottery tickets are often seen as gateways to instant wealth, but few realize the tax implications that accompany such windfalls. Section 194G of the Income Tax Act delineates the provisions for Tax Deducted at Source (TDS) on various activities related to lottery tickets, including their sale, distribution, and associated transactions. Let’s delve into the intricacies of Section 194G:

Scope of Section 194G:

Section 194G pertains to any income accrued by individuals in the form of commission, remuneration, or prize from lottery ticket transactions. This applies to individuals engaged in selling, stocking, distributing, or purchasing lottery tickets. If the income exceeds Rs 15,000, the entity responsible for payment must deduct TDS before disbursing the amount.

Rate of TDS under Section 194G:

The TDS rate applicable under Section 194G is 5% of the income earned. This deduction is made at the source, and no additional charges such as surcharge, education cess, or SHEC are levied at this specified rate. However, if the deductee fails to furnish their PAN, the TDS rate increases to 20%. Notably, if the payment amount does not exceed Rs 15,000, no tax deduction is applicable.

Timing of TDS Deduction:

Tax on income from lottery tickets is deducted either at the time of crediting the income to the deductee’s account or at the time of payment, whichever occurs earlier. Even if the income is credited to a “suspense account” or any other account per the deductor’s books, it is considered a payment to the deductee’s account, subject to the provisions of Section 194G.

Certificate of No or Lower TDS:

Recipients of lottery ticket income can apply to the Assessing Officer (AO) using Form No. 13 to obtain a certificate authorizing nil tax deduction or deduction at a reduced rate. However, to avail of this facility, it is imperative to quote the PAN in accordance with Section 206AA(4).

Responsibilities of the Deductor:

The entity responsible for deducting TDS, or the deductor, has two primary responsibilities:

In essence, Section 194G aims to ensure tax compliance and transparency in lottery ticket transactions, safeguarding the interests of both parties involved.

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Guide to Tax Collected at Source (TCS) – Rates, Payment, and Exemption

editor — Sat, 16 Mar 2024 12:55:45 +0000

The Indian Income Tax Act incorporates provisions for Tax Collected at Source (TCS), where specific individuals are mandated to collect a predetermined percentage of tax from their buyers during certain transactions. These regulations primarily affect business transactions and have minimal impact on the general public.

Recent Updates:

In Budget 2023, the TCS rate for foreign remittances under the Liberalized Remittance Scheme (LRS) was increased from 5% to 20%, effective from July 1, 2023. This adjustment extends to various international transactions such as travel expenses and remittances, excluding education and medical purposes.

Understanding Tax Collected at Source (TCS):

TCS refers to the tax collected by a seller from the buyer during a sale, which is then remitted to the tax authorities. Section 206C of the Income Tax Act governs the goods subject to TCS, with sellers required to possess a Tax Collection Account Number (TAN) for TCS collection.

Goods Covered and Applicable Rates:

Goods covered under TCS provisions encompass various categories, each with its specified rate:

Instances of Higher TCS Rates:

Under Section 206CCA, higher TCS rates apply to buyers who haven’t filed Income Tax Returns (ITR) for the last two financial years, exceeded a certain TCS and TDS threshold, or failed to meet specified criteria.

Seller and Buyer Classifications:

Specific entities such as governments, corporations, and partnerships are categorized as sellers for TCS. Buyers exempt from TCS collection include public sector companies, government entities, and diplomatic missions.

TCS Collection Timing and Calculation:

TCS should be collected either upon debiting the buyer’s account or upon receiving payment. For motor vehicle sales, TCS is collected upon receipt of payment from the buyer. The TCS amount is calculated as a percentage of the transaction value.

TCS Payments, Returns, and Certificates:

Sellers must deposit TCS amounts within seven days from the end of the month in which the tax was collected and file quarterly TCS returns.
A TCS certificate (Form 27D) detailing the transaction specifics must be issued to the buyer within 15 days of filing quarterly returns.
Deadlines for TCS returns and certificates are outlined for each quarter.

TCS Exemptions and GST Provisions:

Submission of Form 24G:

In cases where TDS or TCS is deposited without a challan, relevant entities must submit Form 24G electronically within specified timelines.

Conclusion:

Tax Collected at Source (TCS) plays a vital role in India’s tax collection framework, ensuring revenue compliance and facilitating seamless transactions. Understanding TCS provisions and adhering to associated regulations is essential for sellers and buyers alike to navigate tax obligations effectively.

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