Income Tax department is prepping to nab people who conduct high-value transactions using multiple PANs(Vipin Kumar/HT Photo)
Income Tax department is prepping to nab people who conduct high-value transactions using multiple PANs(Vipin Kumar/HT Photo)

I-T crackdown against people holding multiple PANs after March 31

The government may also expand the list of high-value transactions to track expenditure patterns of those unscrupulous people, who spend large sums on luxuries but underreport their income and evade tax
Hindustan Times, New Delhi | By Rajeev Jayaswal
UPDATED ON AUG 20, 2020 10:51 AM IST

Over 180 million permanent account numbers (PANs) could become defunct unless linked with Aadhaar numbers by the March 31 deadline, as the income-tax (I-T) department, which is equipped with artificial intelligence (AI), is all set to nab tax evaders conducting high-value transactions by using multiple PANs, two officials said, requesting anonymity.

The government may also expand the list of high-value transactions to track expenditure patterns of those unscrupulous people, who spend large sums on luxuries but underreport their income and evade tax, they said.

The I-T law provides for a statement of financial transaction (SFT), earlier known as an Annual Information Return (AIR), to track prescribed high-value transactions undertaken by taxpayers.

The department gets such expenditure details through banks, financial institutions, mutual funds, credit card companies, and other entities.

“It is surprising that in a population of 130 crores only 1.5 crores contribute to the I-T kitty. Prime Minister Narendra Modi had also pointed this out recently. Available data suggest that there is an urgent need to expand the tax base,” one of the officials said.

PM Modi had unveiled India’s first charter of taxpayers’ rights and duties on August 13 and had appealed to the public to introspect that only 15 million people in a population of 1.3 billion pay I-T.

The official quoted above said there are 509.5 million (50.95 crore) PAN cardholders in the country as on June, but only 64.8 million (6.48 crore) of them file income-tax returns (ITR), and only 15 million actually pay I-T.

“Around 4.98 crore (49.8 million) people file ITR. But they either show zero tax liability or claim the full amount of tax paid through ITR,” he added.

A second official said some unscrupulous people use multiple PAN cards to hide their high-value transactions and manage to keep themselves out of the tax net.

“As a result, only 32.71 crore (327.1 million) PANs are linked with Aadhaar. More than one-third PANs could be under the scanner unless linked with Aadhaar before the March 31 deadline,” he said.

Naveen Wadhwa, deputy general manager at Taxmann, a tax consultancy, said: “ If PAN is not yet linked with Aadhaar, there is a possibility to obtain multiple PANs. However, once a PAN is linked with an Aadhaar, it will not be possible to obtain multiple PANs.”

PAN and Aadhaar linkage will help tax officials to keep a tab on such tax evaders, who do not show any taxable income, but splurge money on luxurious items such as buying a vehicle, investing in real estate, travelling overseas and buying jewellery, the officials said.

The government may expand the list of such high-value transactions that I-T department tracks.

According to the second official, the list may include payment of education fee above Rs 1 lakh annually, consumption of electricity above Rs 1 lakh per annum, domestic air travel in the business class, purchase of jewellery or white goods above Rs 1 lakh, payment of property tax above Rs 20,000 per annum, life insurance premium above Rs 50,000 and health insurance premium above Rs 20,000.

However, these details will be collected from the third party only and honest taxpayers would not be required to provide expenditure details in their ITRs, the official said.

“The proposed move is to bring tax evaders into the tax net and not to harass honest taxpayers, as they are not required to file details of high-value transactions in their ITRs,” he said.

Citing an example of a person paying Rs 5 lakh per annum school fee, including donations, without paying any tax, he said, “By claiming that his income is not taxable he is trying to dodge the I-T system. Similarly, a person, who has made purchases of luxury items or spent sizeable amount for hotel bills, is a potential taxpayer and should file h/her ITR.”

“No doubt, the third-party reporting of high-value transactions made by such non-filers would allow the department to nudge such persons to file their returns and pay their due tax,” he added.

Kapil Rana, chartered accountant and founder of HostBooks Ltd, a cloud-based accounting platform, said, “There is a possibility and proven cases, where multiple PAN numbers have been acquired fraudulently and used to evade tax.”

“PAN-Aadhaar linkage will eliminate the possibility of holding multiple PAN by an assessee. It will eliminate wilful tax evaders. Aadhaar is designed in such a way that duplicate cards cannot be issued. Besides, PAN-Aadhaar linkage will eliminate fake or multiple PANs held by the same person in various fraudulent ways.”

Wadhwa said the proposed move of the government to expand the list of expenditure would not cause any incontinence to honest taxpayers. “Through SFT the I-T department gets the information of high-value transactions and expenditures, which can be used to verify whether the income of the person is in sync with the quantum of such transactions and expenditure,” he said.

However, the government zeroes in on only those cases that manifest a larger gap between the returned income and expenditures, he added.

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