Prime Minister Narendra Modi launched the ‘Transparent Taxation’ platform while announcing multiple reforms to improve tax compliance, faceless assessment and ease of filing returns. As part of the rehaul, the government has also proposed to reduce the threshold of various transactions for tax disclosure. This is aimed at widening the income tax base and checking tax evasion.
The list will now include white good purchases, property tax payment, medical and life insurance premium and even hotel payments.
So, the next time you pay a hotel bill or medical insurance premium of more than Rs.20,000, incur an expenditure exceeding Rs.50,000 on life insurance or over Rs.1 lakh for school fee, purchase white goods, jewellery, marble or paintings, be mindful that the entity you have made the payment to will be informing the government of your transaction.
Even payments made to the government such as property tax and electricity bills would be reported if they exceed Rs.20,000 and Rs.1 lakh, respectively. Business-class airline travel, whether domestic or foreign, would be reported, as per communication from the Ministry of Finance. These would be reflected in an individual’s tax account statement called Form 26 AS.
Some of these had already been announced earlier during the Union Budget or are being captured through income tax returns. But a formal implementation has been announced. Under the existing scenario, property purchase above Rs.30 lakh, Rs.10 lakh invested in shares, mutual funds, demat, credit card and fixed deposit transactions above Rs.10 lakh were reported.
The limit for cash deposits in banks has been enhanced from Rs.10 lakh to Rs.25 lakh for savings account and Rs.50 lakh for current account. But, if you have bank transactions exceeding Rs.30 lakh then you would have to file a tax return, whether your transaction has been reported or not.
While it remains to be seen how this would be implemented and whether individual taxpayers would be burdened with additional compliance. But since June 2020, many notices have been issued to taxpayers to verify whether they have incurred certain high-value transactions.
“Notices to confirm transactions reported under the taxpayers’ PAN have already been issued based on the information reported to the government. The taxpayer simply needs to log-in to confirm whether the transactions belong to him or her. Once you verify or decline the transaction, the tax department would cross verify with your income tax returns if any.
The options for an individual include, whether the information is correct, wrong or duplicate. If you decline the information then they would verify with the company that supplied the information. If you are proved wrong then you would have to revise your income tax return.
Another case in point is whether the threshold limits for certain transactions have been set low to include everyone under the tax net. A big group of diners at the restaurant would exceed Rs.20,000 in hotel bill, school payments have been exceeding the Rs.1 lakh mark for many, while Mediclaim premium would be beyond Rs.20,000 for a family for four.