The Northeast accounts for less than 1% of India’s income tax revenue. But it appears to have taken the lead in tax frauds by salaried employees through fake donations, bogus manufacturing by industrial units enjoying a slew of subsidies and misuse of exemption rules for scheduled tribes.
Officials at the regional income tax headquarters here said they have zeroed in on at least 100 government employees in Manipur who made false claims under section 80GGA (donation for scientific research and rural development) and 80G (donation to charitable institutions) under Income Tax Act of 1961. More cases in Manipur, Assam and other states in the region are under investigation.
“An increasing number of tax return related scams of salaried employees have come to light. Certain employees have been found to claim as much as 60% of their take-home salary as deduction by way of donations,” chief commissioner of income tax RK Gupta said. “Some claims implied they did not have any day-to-day expenditure.”
Manufacturing units established under a new industrial policy entailing subsidies have also come under the scanner for ‘bogus production’. According to Gupta, most of these units inflate production figures by 70% to claim capital, transport, power and other subsidies. Even TDS deducted by local agencies are not paid to the Central coffers.
The industrial policy entails transport subsidy for raw materials procured from outside the Northeast. But most units source their raw material locally. Some flour mills, officials said, have even claimed transport subsidy for procuring tons of wheat on scooters.
If that were not enough, many scheduled tribes have claimed tax exemptions under section 10(26) – applicable for scheduled tribes in special category areas such as Nagaland, Mizoram and Bodoland Autonomous Council of Assam – running into millions of rupees. “There are deposits in banks in crores in the name of members of ST community who claim legal immunity under this section,” Gupta said.
The probe of accounts of tax-exempt communities was facilitated by a recent Gauhati high court directive that said income tax department could probe and issue summons to those falling in the ST category and residing in special areas. This followed a petition by a retired Nagaland officer who cited provisions under section 10(26) after crores of money was found deposited in his bank account on specific dates.