Bogus HRA Exemptions tracked automatically

Bogus HRA Exemptions tracked automatically

-Dr. Lalit Kumar Setia

The statement of annual information tracks the financial dealings of an individual with a PAN number. Like 26AS – Tax Credit Statement, the AIS can be downloaded by logging in to the incometax.gov.in portal.

PAN number relating dealings are tracked automatically

Wherever the bank account is opened, it is a must to mention the PAN number. Whenever any interest be credited in the saving or fixed deposit bank account, it will automatically be tracked in the Annual Information Statement (AIS). An individual has to verify only, at the time of filing the income tax return. Similarly, the income from dividends or income from the sale of sales, everything is connected with an account, opened with the PAN number.

Rental income will automatically be tracked

The employees in the job, require to give the PAN number of the landlord, to whom they are paying the rent. The employer while giving the HRA exemption, requires to insert the PAN number of the landlord to whom the rent is paid by the employee. This information will be included in the Annual Information Statement of the person whose PAN number is provided by the employee and submitted by the employer to the income tax department. The rental income will automatically be mentioned in the pre-filled income tax return of the person whose PAN number is mentioned.

Bogus HRA exemptions will be tracked automatically

Mr. A in Jhajjar Haryana is working in a Government job in Gurgaon. When his drawing and disbursing officer asked him to provide the PAN number of the landlord, for getting exemption on the HRA amount, he submitted the name and PAN number of the landlord.

In case, he is not providing the PAN number of the landlord and the amount of monthly rent paid is above Rs. 8000 (eight thousand) rupees, then the DDO will not give any tax exemption. The rent receipts are required to be submitted to the DDO and even the rent agreement or declaration is required.

The Annual Information Statement of the landlord will intimate him/her that he/she earned from the rental income and he/she has to report the same in the income tax return.

Section 194I is particularly for TDS on rent paid

As per the income tax act, the individuals who are paying monthly rent above Rs. 50 thousand, require to deduct TDS @5% at the time of paying rent to the landlord. The TDS will be deposited by the individual using his PAN number and it will automatically disclose the income of the landlord to the income tax department. In case, the landlord did not report any rental income, he/she will get a notice from the income tax department.

False Rent Paid Declaration may be tracked automatically

It is also possible that the employees mention the PAN number of another person to the employer in the self-declaration. It is also possible that the employees are giving fake rental receipts to the employer. The bogus declaration of the HRA with PAN number will show the rental income in the AIS of a genuine person. The genuine person may submit feedback on AIS citing the amount mentioned in the pre-filled income tax return or AIS is incorrect. In such a case, the false rent paid declaration will be tracked automatically.  

 *Copyright © 2021 Dr. Lalit Kumar. All rights reserved. 

All Intellectual Property rights including Copyright etc. are reserved and vested exclusively with the author or editor, Dr. Lalit Kumar. No part of the material contained in this webpage may be reproduced or transmitted in any form or by any means, electronic, technical, photocopying, recording or otherwise, or stored in any retrieval system of any nature without the written permission of the author or editor, Dr. Lalit Kumar. 

This content 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 23rd December 2021 and last updated on 23rd December 2021. The writer can be contacted on lalitkumarsetia@gmail.com 

More Articles

https://drlalitsetia.blogspot.com/p/new-articles-study-material-notes.html 

Responsibilities of Head of Accounting Organizations

Responsibilities of Head of Accounting Organizations

-Dr. Lalit Kumar

In Government Organizations, the hardest responsibility is ‘ensuring economy, efficiency, and effectiveness – the 3 Es’ in payments and the second hardest responsibility is to improve the tax collection system to the extent possible. The Chief Controller of Accounts (CCAs) or Controller of Accounts (CAs) is with the independent charge being Head of Organizations. They are expected for critical analysis of Government functions based on above stated 3 Es – Economy, Efficiency, and Effectiveness.

Rules, Regulations, and Instructions:

The Finance Ministry with the help of the Finance Department frames rules and regulations, also issue instructions as per the need of changing business environment. To improve transparency with online procurement of goods and services, the Government e-Marketplace (GeM) incorporated by the Government and now in every state, there is more emphasis upon adoption of GeM. However, the heads of accounting organizations are responsible to certify the reasonability of the rates on which products and services are being procured in their offices.

Emphasis upon Outcome Budgeting:

The time is changing fast, now Government is focusing upon Outcome instead of Outlay and Output. There are ceilings in the budget for effective monitoring of the utilization of financial resources and managing the debt due to excess demand of financial resources in the offices. The budget is formed based on the Output-Outcome Monitoring Framework (OOMF) as per the latest guidelines of the Ministry of Finance / Finance Department.

In Finance Department, the Budget branch is entrusted to furnish accurate budget estimates and monitoring of utilization of funds as per the amount proposed by the departments.

Financial Reporting:

The heads of accounting organizations are responsible to prepare the reports based on financial records to enable better decision-making by the Administrative Officers (IAS / IPS / IFS etc.).

The reports and periodical reviews, analytical diagrams for managerial decisions, are now part of the financial reporting.

Internal and External Audit

It is well known that the Audit function is completed by the Chartered Accountants (CAs) in Private and Public Sector Organizations as per the Companies Act. But at the same time, in Government Organizations, the primary audit function is directly in the hands of heads of Accounting Organizations i.e. Accounts Officers, Senior Accounts Officers, Chief Accounts Officers, etc.

a. Enforcing Internal Controls and Checks –

The challenge is to supervise and ensure timely payments to the right beneficiaries and claimants as per the rules framed by the Finance Department and latest instructions. The Government also deals with the Contractors and Vendors for the supply of goods, services, works including manpower solutions.

b. Preparing Monthly Accounts as per Rules –

It is not so easy as it seems. Accurate figures of accounts along with compiling the financial records, reconciliation of the accounting information is a hard responsibility. Most of the time, the RTI Activists demand such information and put their queries with quoting the inaccurate information sometimes due to clerical mistakes (if any). The accounting tasks are time-bound and related to taxation, budgets, and compliance of Companies Act or Partnership Act for preparing Financial Statements and the disclosure of the same in the public domain.

After preparing the accurate financial accounts, these are submitted to the Accounting Organization i.e. CGA in Central Government and AG (Accounts) in State Governments.

c. Advisory Services for reforming taxation –

The Government Organizations realize revenues most of the times from taxation and it is the basic focus area to reform by the Government. The heads of accounting organizations are responsible to advise the Government for reforming the taxation function and make it more transparent and error-proof.

The rising debt on Government can easily be reduced with effective collection of taxes with least cost.

Leveraging Information Technology:

Without Information Technology, every function is incomplete. The Internet of Things and Artificial Intelligence have changed the scenario of Accounting. The use of Software, Apps, Web portals, and tools of Artificial Intelligence not only detects the irregularities but also supports administrators to think out of the box and make the organizations more profitable. The technological environment cannot be easily understood by Accounting people because, in most Government Organizations, the heads of accounting organizations lack skills in Information Technology such as the Internet of Things and Artificial Intelligence tools.

The implementation of Financial Rules with the help of Financial Management Systems convince the officers both Accounting and Administrative officers to use the portals for carrying out their financial functions. The preparation of Sanctions, processing of Bills, Making Payments in digital forms, processing of Receipts and Management, incorporating the Direct Benefit Transfer using Payments directly into the Accounts of Payees / Beneficiaries, analyzing the flow of Cash and Funds including inflows and outflows in various types of activities, and finally reporting of financial records with the use of templates, graphs, and diagrams; every function is being transformed with the impact of Information Technology.

Course on Decision Making for Effective Financial Administration by Dr. Lalit Kumar Setia:

This course first time organized from 6th September to 10th September, 2021 particularly to support the Officers/Official ensuring effective financial administration in their offices.
The Haryana State Training Policy, 2020 notified by Honorable Chief Secretary to Government, clearly state to focus upon equipping all functionaries of Government with adequate knowledge and skills, bring about positive attitudinal changes, and build capacities to enhance performance.
The main objective of the above course is to build and enhance the capacities and sharpen the skills for making decisions relating to ensure proper utilization of financial resources, procurement of goods and services using online and offline modes, workout medical reimbursement in Cashless and packages, and deduction of Tax Deduction at Source (TDS) as per Income tax and GST Act as per the directions of Government for effective financial administration.
By the end of this course, participants will be able to:
•              Describe the bases of making Financial Decisions in ensuring proper utilization of Financial Resources, Budgetary Control by using Online Budgeting portal as per guidelines of Government
•              Describe the process of making decisions in Procuring Goods and Services, taking sanctions, use of approved source and open market, Tendering and Online Procurement using Government e-Marketplace (GeM).
•              Describe the rules, latest instructions, and directions of Government for Effective Financial Administration in Income Tax, Goods and Services Tax, Medical Reimbursement, Recovery of over payments, submission of e-TDS returns in Income Tax and GST etc. 

The Government Departments can apply for the desired training on lalits.hipa@nic.in and after confirmation/acceptance of the nominations, the participants are added to Google meet classes. For more information, the contact number of Dr. Lalit Kumar Setia is +91-9416382720.

*Copyright © 2021 Dr. Lalit Kumar. All rights reserved.

This article is written by Dr. Lalit Kumar Setia; a renowned author and trainer. The article was published on 9th August, 2021 and last updated on 4^th September, 2021. The writer can be contacted on lalitkumarsetia@gmail.com 

Next Article - Computerised Systems

https://drlalitsetia.blogspot.com/2020/08/computerized-accounting-systems.html 

- How a Person Caught for Tax Evasion

https://drlalitsetia.blogspot.com/2021/07/how-person-caught-for-tax-evasion.html

How a Person Caught for Tax Evasion

 How a Person Caught for Tax Evasion

-Dr. Lalit Kumar Setia

Modes of Tax Evasion:

Taxpayers most of the time, try to delay the payment of taxes or even be failed to pay the taxes. The Government takes it very strictly and there are provisions of penalties, late fees, interest on delayed payment etc. Secondly, there are instances where the smuggling is used to hide the transactions and such things are curbed with the help of taxation inspectors. Third, one of the major modes of tax evasion is the submission of false tax returns. In Government as well as Corporate organizations, the employees and suppliers to organizations, submit false tax returns hiding their income; known as concealment of income. Submission of false tax returns is taken very strictly and the person is required to pay 300% of the amount including a 200% penalty and even there are provisions for imprisonment if it is done intentionally by a person.

The fourth way is to show inaccurate financial statements, most organizations maintain two types of books, one in the fairway and the second is a rough way. Whenever any taxation inspector or audit team comes into the shop/office, the fair accounts are shown which are incomplete. Even it is tried to give bribes and hide the facts from Government.

The fifth way is the submission of false documents (affidavits, certificates, undertakings, etc.) particularly to claim exemptions, deductions, and other benefits available in the Income Tax Act. This is mostly done by the persons who know the provisions in a smarter way.

The sixth way is ‘Non Reporting of Income’, for example, hiding the income from specified sources such as the sale of assets, business transactions without taking money in a bank account, etc.

The seventh way is ‘to store the money and wealth outside the country so that the Government cannot look into the money and wealth retained by the persons.

How Government collects Tax?

The Income Tax Department directs Drawing and Disbursing Officers (DDOs) to deduct a certain percentage of tax from certain specific nature of payments and thereafter remit the same. In the United States of America (USA) is known as ‘Pay As You Earn’ means the citizens while receiving an income, get the tax deducted first. It is basically a great method to reduce tax evasion. Isn’t it?

Status of Income-tax return forms

In India, the extended last date of Income-tax return was 31st December 2021. As of 19th December 2021, the total income tax return forms received were 3.83 crores out of which, more than 50% that is 2.17 crores were submitted by salaried employees. The figures state that out of people contributing to the collection of income tax, the majority of taxpayers belonged to the 'Salaries category', and this majority matters in the economic development of India. 

In Government organizations, DDOs are responsible to withdraw government money from the treasury and disburse the same as per the rules of the Finance Department. How do DDOs support tax administration? What is expected from the DDOs as far as Income Tax is concerned?

A. Obtaining Tax Deductor Account Number (TAN):

Before deducting tax at source (TDS), it is a must for the DDOs to obtain a Tax Deductor Account Number (TAN). It is required to mention the TAN number while depositing the TDS, submit the return of TDS, and issue the certificate of TDS to the deductee.

B. Receiving the correct PAN number from the Deductees and Mentioning it:

It is true that the DDO has to deduct TDS if payments are of certain specific nature as per the Income Tax Act. But it is also necessary that the amount deducted at the source is reflected in the correct PAN of deductees. In case, the PAN number is written wrong or the deductee submits it wrong; the tax credit cannot be provided.

C. Tax Deduction at Correct Rate as per Act and its Deposit

A DDO should be aware of the provisions of Income Tax, how much tax or at which rate, the tax be deducted from which nature of the payment. After deduction of tax, it cannot be retained in the pocket of DDO or in any other account of office/government. It is required to transfer the deducted amount to the designated banks either through book transfer or challan. In case, the TDS is collected by Government Department then it is transferred immediately with the book transfer entry at the time of making payment, and in case of others, it is required to deposit the TDS amount before the 7^th of the following month. There is one exception, that is the last month of the financial year i.e. March. In case, the TDS amount is collected by others (i.e. other than Government Department), it is required to deposit the amount before 30^th April.

For a deposit of TDS, the deductor is required to use Challan no. 281 and pay the amount either on the web portal of Income Tax or in designated banks that facilitate Income Tax Department in effective administration. It is also necessary to quote the correct section of the Income Tax Act with the correct rate of TDS in each deductee record.

D. TDS / TCS Return filing by Deductors:

All Government Departments, Companies, Persons whose accounts are required to be audited, and the persons with more than 50 deductees are required to compulsorily submit the TDS / TCS return in a specific format i.e. Form 24Q for Salaries Payments, Form 26Q for Non-Salaries Payments, and Form 27EQ for Tax Collection at Source, etc.

It is also necessary to file the correction statements whenever there is any discrepancy noticed in the earlier-filed TDS / TCS returns.

E. Issue of Certificates to the Deductees:

It is required to issue the certificate to the deductee with mentioning the details of the amount deducted. In the case of salaried deductees, Form 16 is issued up to 31^st May and in the case of non-salaried deductees, Form 16A is issued within 15 days from the due date of furnishing the TDS return.  

*Copyright © 2021 Dr. Lalit Kumar. All rights reserved.

This article is written by Dr. Lalit Kumar Setia; a renowned author and trainer. The article was published on 27th July, 2021 and last updated on 4^th September, 2021. The writer can be contacted on lalitkumarsetia@gmail.com 

Next Pages

-Taxability of Conveyance Allowance

https://questionsinexam.blogspot.com/2021/07/taxability-on-conveyance-allowance.html

-Irregularities in Tendering:

https://drlalitsetia.blogspot.com/2021/07/irregularities-in-tendering.html 

-TDS on payment made to Government

https://drlalitsetia.blogspot.com/2021/08/tds-on-payment-made-to-government.html

Research, Development and Innovation

 Research, Development, and Innovation

Why Research is necessary for Development?

Research means Re-Search, search again and come with something new to innovate, something new to contribute in the development, replacing old systems with something which is more effective, efficient, and economic. In economics, marketing, finance, and even in other areas relating to social science, in most of the research, an issue is explored, and keeping in view, the issue, a program is planned to meet the needs or solutions to the issue or problem, even it leads to in-depth information about the specific issue and seeks solutions which bring development. S Namanji (2012) (can be retrieved at https://www.ajol.info/index.php/majohe/article/view/78945/69263), explained to use mixed methods approach and evidence to reach an effective conclusion.

Research, Development, and Innovation in the United Kingdom

It is well known that the United Kingdom is one of the leading nations in using Research for Development and Innovation and due to this quality, the nation is effectively marketing its jet engines, vacuum cleaners, MRI Scanners, etc., which are still a challenge for other nations to manufacture their own. In Global Innovation Index 2019 (available on http://statisticstimes.com/ranking/global-innovation-index.php), the United Kingdom scored at No. 5 after Switzerland, Sweden, the USA, and the Netherlands. It is really a matter of concern that India score at 52^nd.

Why Rich Industrial Families prefer Developed Economies for Living Life:

All over the world, it is fact that when a person starts earning money, he likes to switch from rural to urban, urban to a metro city, and metro city to a developed foreign country. Why?

It is because of the facilities offered by the developed nations, resources of the developed nations, and long-term life without diseases due to better infrastructure, medical facilities, and relaxation in life with fewer tax rates on goods and services. In developed nations, there is the ease in accessing funding for executing projects or doing business. The use of research of the universities and academics contribute to making the business house feel more innovative. Moreover, it is easier to find customers.

Use of Intellectual Property Laws more strictly:

For having research-oriented people to stay or for talent retention, it is a must adopt and use intellectual property laws more strictly. The developed nations such as the United States of America, United Kingdom, Switzerland are the nations, where the ideas are protected by using intellectual property rights. The United Kingdom spends 6 Billion pounds every year for financing the research and support innovation in Research organizations and universities.

India’s approach to Research, Development, and Innovation:

No doubt, India is at 52^nd rank in Global Innovation index 2019; but it is now improving with promoting Technology Business Incubators (TBIs) and the use of Artificial Intelligence (AI), Internet of Things (IoT) are making India more vibrant than ever. The digital literacy, an increasing number of patents, use of eco-friendly projects, and use of collaborations among scientific and technical organizations have contributed to improving the lifestyle, manufacturing products instead of importing. The nanotechnology in the Pharma sector and technology-driven Green Revolution in the Agriculture sector are making India, a focus of researchers and scientists around the world. The new policy i.e. Science, Technology, and Innovation Policy 2020 is contributing to improve Governance in research with periodic reviews, policy evaluations, and use of proper strategy in achieving the desired objectives. (Read more at https://www.ibef.org/industry/science-and-technology.aspx)  

Role of Administrative Training Institutes in Innovation and Development

The administrative training institutes (ATIs) of India, should adopt integrated approach for contributing in research, development and innovation. The attitude of Civil Servants, Officers of Government, and other stakeholders; depends upon the level of efficiency in the work of Government. The practical experiences should be shared constantly to disseminate the learning among the people making similar work and facing problems. The HIPA, MGIPA, RIPA, etc. are the Administrative Training Institutions of India, each state of India has one ATI. The number of webinars, national events, state level courses should be done in collaboration to disseminate new learning, methods, and skills in successful effective ways. 

*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 25th July 2021 and last updated on 4^th September, 2021. The writer can be contacted on lalitkumarsetia@gmail.com 

More articles of your interest:

https://successinexamination.blogspot.com/2019/05/blog-post.html

https://drlalitsetia.blogspot.com/2017/05/dreams-of-narendra-modi-can-be-achieved.html

https://drlalitsetia.blogspot.com/2021/07/how-gst-is-destination-based-tax.html

Irregularities in Tendering

 Irregularities in Tendering

Role of Central Vigilance Commission

The managerial administration deals with the issues relating to the proper procurement of goods and services. The public sector organizations have strong governance mechanisms to deal with issues of corruption. Before the year 2000, every file of public sector organizations was considered a confidential secret document and at that time, it was very difficult to detect financial irregularities. 

The committee on the prevention of corruption recommended to set up Central Vigilance Commission (CVC) in 1964 and in 2003, the bill was passed in Parliament and ‘the Central Vigilance Commission Act’ is enacted. The CVC inquires and investigates cases of corruption. As per financial rules of the Government, the procurement of goods is required to be justified on three parameters directly related to prudent use of public money i.e. (i) Economy, (ii) Efficiency, (iii) Effectiveness. These three parameters are known as 3 Es for the authorities to look into, before taking the decision to use the public money.

Why use Tender in procurement?

The first and most important cause of using the tender system for procurement is ‘ensuring transparency and efficiency in procurement’. A tender provides equal and fair treatment to vendors and service providers. It promotes competition and the chances of getting goods at the lowest prices increased. The tender process is very difficult to be cracked by corrupt people. The tender in itself is designed particularly to ensure no room for corruption. There are a lot of guidelines issued by the Central Vigilance Commission to carry out procurement-related activities properly.  

Importance of tendering in public procurement 

Tendering is an important process in public procurement because it ensures transparency, competition, fairness, and value for money. Here are some reasons why tendering is important in public procurement:

Transparency: The tendering process is transparent, which means that it allows all interested parties to compete for public contracts fairly. This can help prevent corruption, favoritism, and other unethical practices that can occur when contracts are awarded without competition.

Competition: Tendering encourages competition among suppliers, which can lead to better prices, higher quality goods or services, and more innovative solutions. When suppliers compete, they are motivated to offer the best value for money, which benefits both the government and the public.

Fairness: The tendering process ensures that all suppliers have an equal opportunity to compete for public contracts. This helps to prevent discrimination and ensures that the contract is awarded to the most qualified supplier.

Value for money: Tendering helps to ensure that the government gets the best value for money. By inviting competitive bids, the government can compare prices, quality, and other factors to ensure that the contract is awarded to the supplier that offers the best value.

Accountability: The tendering process is accountable, which means that the government can be held responsible for its decisions. If a supplier is awarded a contract that is not in the public interest, the government can be held accountable for its decision.

In summary, tendering is an important process in public procurement because it promotes transparency, competition, fairness, value for money, and accountability. By using a tendering process, the government can ensure that public contracts are awarded to the most qualified and cost-effective supplier.

Lalit Kumar

e-Procurement 

e-Procurement is the process of conducting procurement activities electronically, typically through the use of internet-based technologies. It involves the use of digital platforms and tools to streamline and automate the procurement process, from the initial sourcing of suppliers through to the final payment of goods or services.

e-Procurement offers a number of benefits over traditional procurement methods. Some of these benefits include:

Increased efficiency: e-Procurement can streamline and automate many of the processes involved in procurement, such as supplier identification, request for proposal (RFP) issuance, and purchase order creation. This can save time and reduce administrative overheads, allowing procurement professionals to focus on more value-added activities.

Cost savings: By automating and streamlining procurement processes, e-Procurement can help reduce procurement costs. It can also help to drive down prices by increasing competition among suppliers.

Improved accuracy: e-Procurement can help reduce errors in the procurement process, such as manual data entry errors or miscommunications. By automating many of the procurement processes, e-Procurement can help ensure that data is accurate and up-to-date.

Better supplier management: e-Procurement can help procurement professionals to manage supplier relationships more effectively, by providing real-time visibility into supplier performance, and automating the process of supplier selection and evaluation.

Increased transparency: e-Procurement can help increase transparency in the procurement process, by providing real-time visibility into the status of procurement activities, including RFP issuance, supplier selection, and contract award.

e-Procurement can be used in a range of procurement activities, including sourcing, bidding, negotiation, contract management, and payment processing. Some common e-Procurement tools include e-sourcing platforms, e-tendering systems, e-auction platforms, and e-invoicing systems. These tools can be used by both private and public sector organizations to streamline and automate their procurement processes.

Precautions before proceeding to award Tender:

The tender process is required to be followed strictly in order and a single mistake can lead to financial irregularities. There are a lot of tenders in which the competent authorities face litigation from the suppliers’ side and sometimes auditors point out the irregularities. Before proceeding to award a tender, the procurement authorities should reflect the following upon file with a justification pointing out the true and fair position of the authorities:

(i)  Specifications in terms of quality and quantity should be justified.

(ii) Procurement of excess quantity of goods should always be avoided.

(iii) The tender procedure should be notified to the committee constituted to supervise and implement the tender system. The procedure should be fair and transparent, in other words, full-proof in awarding the tender to a good vendor.

(iv) Procurement of goods should only be done as per the actual requirements of the office.

(v) Provision should be made to keep proper records of procurement stages so that the procurement cannot be challenged as faulty.

Delhi Transport Bus Corporation Procurement:

Delhi Transport Corporation procured one thousand low-floor buses. Further, an Annual Maintenance Contract (AMC) was also done in the procurement of the buses. The basic principle for fair procurement is to create competition among the bidders so that the vendor or service provider with the least price can be provided the work order. The BJP demanded a CBI probe in this matter on the basis that tendering process is completed with monopoly pricing instead of competitive pricing. It is a must to use proper procedure and in the process of procurement of low floor buses and AMC, there were procedural lapses. Even if there is no scam in a particular case, it is a must to adopt a fair procedure.

Income Tax Department Raids Dainik Bhaskar

The concern is relating to tax evasion and the department of Income Tax raids usually. This time it is upon Newspaper Agencies such as Dainik Bhaskar.

In next article, it is studied how procurement is done in Government. 

https://drlalitsetia.blogspot.com/2019/04/procurement-of-goods-in-government.html 

https://drlalitsetia.blogspot.com/2021/07/use-of-position-and-government-resources.html

Copyright © 2019 Dr. Lalit Kumar. All rights reserved.

Income Tax Department Is Looking At You

Income Tax Department Is Looking You!

-Dr. Lalit Kumar Setia

Dear Learners! Now you can join my online courses - Apply now!

https://docs.google.com/forms/d/e/1FAIpQLScvTHllGwDyt9lqJyfF_cK-pnKiM7QIkKir339GlXYI8UJbfA/viewform

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). 

A Course on e-filing Income Tax Returns (ITR) for Salaried Persons is organized in online mode for specific training for accurately e-filing Income Tax returns specifically ITR-1.

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 

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