The government is tightening the noose around tax evaders by strengthening its system for Tax Deducted at Source (TDS).
The focus on technology-based processing can be gauged from the fact that Finance Minister P Chidambaram did not even wait for the Centralised Processing Cell (CPC) for TDS in Ghaziabad to become fully operational and made sure he launched it a week before the Union Budget. Next, he widened the net of source-based tax deduction in his Budget speech, bringing transfer of immovable property under TDS.
As the finance minister has proposed to make e-filing mandatory for more categories of assessees, an increase in online returns would leave more data at the disposal of CPC (TDS), which is likely to play a major role in a 360-degree profiling of taxpayers and nab tax evaders. The CPC would analyse data and assess patterns to reach habitual defaulters. The defaulters would be warned electronically to take corrective action. The cell would also provide data on foreign remittances on which TDS had to be deducted.
"Compliance level will go up. At present, people are not complying because they are not being watched. A sizeable percentage of deductors are not reporting, or under-reporting," a tax official said.
About 40 per cent of the direct tax collections come in the form of TDS. The mop-up this year is estimated at Rs 6,68,109 crore. This implies, about Rs 2,67,243 crore will come from TDS, if the target is met.
The cell would address the problems faced by employees when their employers deduct the tax but do not deposit it with the government. Last year, some employees of Kingfisher Airlines had got tax notices over non-payment of TDS. The CPC would provide a TDS certificate to employers and employees could check its authenticity on the cell's website.
"If a deductor deducts tax but doesn't submit it, or pays less, both the department and the employer could easily find out. We will match the challan reported by bank to the challan reported by the deductor. If the data don't match, we will ask the deductee to make the payment," the official said.
Earlier, the CPC's job was being done by NSDL and the income-tax department, but there were issues with data synchronisation. While the tax department was handling defaults, NSDL was responsible for Form 26AS. In case of any mismatch in Form 26AS and the tax payment, there was no mechanism to flow back and change form entries. Now, everything would be under one body.
Spread across 40,000 sq ft, the swanky CPC office, with four floors, has a strength to accommodate about 250 people, including staff of technology partner Infosys. This is the first cell for TDS �" the one in Bangalore, which started pilot runs in November last year, processes only electronically-filed I-T returns.
The Ghaziabad CPC would process over 400 million TDS applications filed by about one million entities annually. It has a 35-people call centre that has been receiving roughly 2,500 calls a day.
The cell would enable real-time reconciliation of TDS filings and refund claims, instant detection of erroneous claims and faster payment of verified claims. It might also lead to significant savings for the government through a cut in interest accumulation on delayed tax refunds.
SOME PAYMENTS ON WHICH TDS APPLIES
- Interest on securities
- Interest on bank deposit
- Prize money from a game or lotteries
- Winnings from horse races
- Payment to contractors and sub-contractors
- Insurance commission
- From non-resident sportspersons or sports associations
- Payment for repurchase of mutual fund units
- Commission brokerage
- Commission on sale of lottery tickets
- Rental income
- Fees for professional or technical services
- Payment for asset acquisition
- Payment for National Savings Scheme
- Income from mutual fund units
- Income from foreign currency, bonds or Indian company shares
- FIIs' income from securities
- Interest or dividend payable to govt or RBI