The Hindu Business Line : Plan afoot to maximise tax collection

THE message that `a penny saved is a penny taxed' seen on some shop windows in these days of high profile retailing may well be responsible for the boom in retail sales at all major metros round the year.

But the income-tax department, armed with the clear mandate to raise revenue collections, it seems is convinced that the cash is saved and actually spent, but certainly not taxed to the desired extent. And it now wants to adopt the TDS/TCS route in a big way to grab the cash spent in a wrong way.

According to highly placed Government officials, there is an urgent need to further strengthen the TDS (tax deduction at source) machinery to plug leakage of revenue and thereby maximise tax collections. And the CCITs (Chief Commissioners of Income-Tax) have been asked to put their heads together for possible new avenues of TDS collections.

At the recent zonal conference of Chief Commissioners here, a lot of brainstorming has taken place on how to plug the revenue leakage and maximise collections. As per information available with Business Line, discussions were held on whether TDS could be extended to some new areas.

For instance, where the sale or purchase of immovable property (not being agricultural land) has taken place in the relevant previous year of a monetary value not exceeding a specified sum, TDS could be done by the registering authority from the seller on the value on which stamp duty is charged. Or where there is payment of compensation for acquisition of land (other than farm land) by Government authorities, TDS may be done from the compensation amount.

The discussions have also centred around TDS application for sale or purchase of bonds, shares, units of mutual funds etc., of monetary value exceeding a specified sum (say Rs 50,000 in any single transaction (TDS to be done by broker from the seller).

As per a background paper presented on the scope of expansion and improvement in provisions of TDS and TCS (tax collection at source), some of the key areas which can be brought under TDS and TCS to prevent tax evasion were: a) TDS on long term capital gains (LTCG) arising out of transfer of immovable property, b) Application of TCS provisions to sellers of hardware and building materials, c) TCS application in purchase of jewellery in cash, and d) Application of TCS for sale of raw hides.

In the case of transfer of immovable property, it is felt that massive tax evasion takes place, and there is an urgent need for the department to exercise control over such transfers. Expert groups, it is pointed out, have in the past suggested TDS on LTCG.

On the need for bringing sellers of hardware and building materials under the TCS net, the background paper suggests that huge transactions are carried out for purchase of hardware and materials, and with TCS, it may be easier for the department to have control over cash transactions. Similar is the case with purchase of jewellery in cash, it is stated.

In the case of fraudulent refunds on the basis of bogus TDS certificates (many cases have come to the notice of the department over the years), it is pointed out that changes will have to be made both in TDS and TCS provisions, as frauds occur because of the loopholes in the existing procedure for issue of TDS certificates.

It is suggested that a task force may be set up to study the loopholes in procedure and suggest changes to introduce proper accounting of TDS certificates.

Leakage of tax revenue, according to the chief commissioners, was also due to the fact that the tax administration, "most of the time suffers from organisational failures, inefficient record management and lack of tax information network. In addition to these administrative failures, the legal system also places limits on the ability of the Government in detecting tax evasion effectively and punishing the tax evaders".

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