Income Tax Department Is Looking You!
Dear Learners! Now you can join my online courses - Apply now!
Why Government imposes Income Tax?
Developed and developing nations around the world, adopt the tool of imposing income tax as a major source of income. From the amount collected through income tax, the development expenditure is financed and it is ensured to develop the nation economically as per the needs of the citizens. The Government finds it very easier to collect income tax by using 'Tax Deduction at Source'. The people who are doing jobs under their employers, face TDS on Salary which is deducted by the employers. The people earning interest on deposits, face TDS on interest on deposits by the concerned financial institutions. It is very hard for the Government collecting income tax, without ensuring the effective process of Tax Deduction at Source (TDS).
Collection of Income Tax from people other than Employees and Investors:
One of the biggest problems of the Government is to collect income tax from self-employed people with making fewer investments in financial institutions. For example, Mr. X is running a shop and reporting less income. What can be done by the Government? Definitely, the Government may check the financial records of the shop to detect accurate income and impose penalties under Income Tax Act. But the problem is that Mr. X has managed the accounting books with too much care to be caught in the concealment of income and even he hired the services of a chartered accountant to plan and protect him from heavy taxes. Therefore, it is very hard to collect taxes from people who are neither employees nor investors.
Why do people prefer to start their own business than to do a job?
The take-home income of the self-employed people
is higher than the incomes of employees who are serving any organization and it
is due to non-compliance of income tax act or in other words with the help of
theft of income tax. The rates of income tax and cess are increasing every year
but the heat of the increase in income tax and cess is very less for the
following people:
1. The people doing
agriculture (farming only)
2. Those who are having the hidden income (without the issue of bills to the users/buyers), and
3. Those who are supported
by Chartered Accountants (firms and companies with concealment of income using
hired CAs).
It is very hard to
collect a fair amount of income tax from the above people. To finance
the development expenditure of the nation, the Government is raising taxes and
charging more taxes from the people who comply with them i.e. employees and
investors.
The vigilance of Income Tax Department on Spending/Investing
Are you spending cash to buy the property and paying
less tax in general, the income tax department is looking at you and noticing your
transactions.
No matter you are giving this information to the Income-tax department or not. The department is taking care of your such transactions. You being a taxpayer, can view the transactions recorded in your login at incometax.gov.in in the Annual Information Statement.
26AS and AIS Statement
The Income Tax Department rollout the new statement - AIS (Annual Information Statement) which gives all the details of financial transactions against a PAN number. Earlier there was only one statement i.e. Tax Credit Statement 26AS, now there are two statements, the additional statement is the Annual Information Statement. The AIS Statement is a more detailed statement of the income of the taxpayer including income from interest on the savings accounts, income from mutual funds, etc. Every taxpayer can download the statement from the portal of incometax.gov.in. After login, in the Services tab, there is an option of Annual Information Statement (AIS). In the AIS statement, there is a tax information summary which is brief details of the Annual Information Statement for the convenience of the taxpayer.
The password of the downloaded Annual Information Statement (AIS)
The Annual Information Statement can be downloaded as a .pdf file or .json file as per the requirement of the taxpayer. The downloaded file is password protected to reduce the misuse of the confidential information and credentials of the taxpayer. The password is PAN Number (in Capital letters) followed by Date of Birth. For example, your PAN number is ATMPO1234R and your Date of Birth is 1st December 1987; then the password will be ATMPO1234R01121987. In an AIS statement, a taxpayer can access the details of 'interest on all savings accounts connected with his/her PAN number', 'income from Salary as per the statement filed by the employers', 'income from the investments or mutual funds as per the statement filed by banks and financial institutions, 'income from dividends, etc.
Tax Planning and Tax Evasion
Doing tax planning is
good for everyone but tax evasion is a crime. In case, anyone is evading tax
and it is traced by the Income Tax Department or other authorities by observing
expenditure of the persons, then the tax evaders are panelized as per the
provisions of the Income-tax act.
As per new provisions of the Income Tax Act, financial institutions including banks, brokerage companies handling mutual
funds, and Registrars of properties are required to intimate the Income Tax
Department about the transactions of heavy amounts with the PAN or TAN number
of the person.
Fixed Deposits in Financial Institutions:
Whenever any person deposits an amount in the fixed deposit account and it becomes more than Rs. 10 lacs against his PAN number, the financial institutions require to inform the income tax department. However, in case there are old Fixed Deposits renewed every year and be more than Rs. 10 Lacs, there is no need to inform Income Tax Department of such old Fixed Deposits.
The amount deposited in Bank in one Financial Year:
As per rules, the financial institutions are required to intimate Income Tax Department about the persons who have deposited more than Rs. 10 Lacs during the Financial Year. There is a provision to pay income tax for making cash deposits above Rs. 10 Lacs.
Beware of using more amount through Credit Card:
If you are using a credit card and get your limits
enhanced for use of more amounts. In case, the amount due on the usage of a credit card becomes more than 1 Lac, the Financial Institutions are required to
inform the Income Tax Department. And during the year if the amount spent,
becomes more than 10 Lacs the Income Tax Department imposes a tax upon it.
Purchase of higher amount properties:
The properties are registered whenever purchased. If
you are purchasing a property with costs more than 30 Lacs, the registrar is
required to send the information to the Income Tax Department. In case of the purchase of bonds, if the amount of bonds, shares, and mutual funds issued by the
company becomes more than Rs. 10 Lacs, then the company is required to intimate
it to the Income Tax Department because the buyer is required to pay tax in
such transactions.
Black Money Control by Seeking Statement of Financial
Transactions:
The income tax department
is now more active to curb the practices of people accumulating black money. No
doubt, the initiatives have also been taken earlier by the department by
launching various disclosure schemes. But now focus is to utilize the
information from certain government agencies and authorities for identifying
certain transactions based on reliable submitted reports of high-value
transactions in "Annual Information Return (AIR)" u/s 285BA.
What do people are preferring today to increase take-home income?
In India, work in Multinational
Companies (MNCs) particularly, the work from home (WfH) with getting salaries
in cryptocurrency which is not easily regulated by the Government; is a new
challenge for the Indian Government. People are preferring this mode of income
to increase their take-home income (without the imposition of income tax by the
Government).
Are you interested in an Online Course related to Income Tax?:
1. https://smartinstituterls.blogspot.com/2022/12/income-tax-matters-in-government.html
2. https://smartinstituterls.blogspot.com/2022/12/computation-of-income-tax-liability.html
*Copyright © 2021 Dr. Lalit Kumar. All rights reserved.
This article is written by Dr. Lalit Kumar Setia; a renowned author and trainer. He completed his Doctorate in Commerce from Kurukshetra University Kurukshetra and MBA in Information Technology from GJU, Hisar. He also wrote two books, 15 research papers, and organized more than 200 Training Courses during his working period since 2006 in Haryana Institute of Public Administration, Gurugram. The article was published on 26th May 2021 and last updated on 7th October 2021. The writer can be contacted on lalitkumarsetia@gmail.com
More content of your interest:
https://questionsinexam.blogspot.com/2021/07/fixed-medial-allowance-from-employer-is.html
https://questionsinexam.blogspot.com/2021/07/taxability-on-conveyance-allowance.html
https://groomthepersonality.blogspot.com/2018/02/financial-terminology-for-drawing-and.html
