GOVERNMENT ANNOUNCES ‘TRANSPARENT TAXATION’ TO BROADEN THE TAX BASE

The Hon'ble Prime Minister launched the ‘Transparent Taxation’ platform on August 13, 2020 for the reform of tax administration in India. The system aims to be seamless, painless and faceless. One of the key features is the broadening of tax base to report high-value transaction to improve compliance and transparency.

Transactions that are proposed to come under radar are:

- Payment of educational fee/donations above INR 1 lakh per annum (p.a.)

- Electricity consumption above INR 1 Lakh p.a.

- Domestic business class travel/foreign travel

- Payments to hotels above INR 20,000

- Purchase of jewellery, white goods, painting, marble, etc. above INR 1 lakh.

- Deposit/credits in current account above INR 50 lakh

- Deposit/credits in non- current account above INR 25 lakh

- Payment of property tax above INR 20,000 p.a.

- Life insurance premium above INR 50,000

- Health insurance premium above INR 20,000 p.a.

- Share market transactions/D-MAT accounts/Bank lockers

However, the taxpayers won’t have to file this information themselves in the income tax return. Information of these transactions would be collected by third parties or reporting entities such as banks. The purpose behind the reporting of more high-value transactions is to identify those who are either not filing returns or the income disclosed in the returns is not proportionate to their spending.

Form 26AS, an annual tax statement that reflects the details of all high-value transactions by a taxpayer has been revised to this effect. The change was implemented to push voluntary compliance, and ease e-filing of returns so that these transactions are included in calculating the correct tax liability while filing returns.

Conclusion

With these reforms, the aim is to boost the confidence of the taxpayer. One of the best features is that the taxpayers can respond to the scrutiny notice electronically without the requirement of visiting a tax office or meeting any official making the process convenient.