Aimed at increasing collections from newer avenues

In a move reminiscent of the erstwhile Fringe Benefit Tax, the tax authorities are monitoring allowances, perks and reimbursements to senior management of top companies, large employers and public sector units.

The Central Board of Direct Taxes (CBDT) in an internal report ‘Central Action Plan 2014-15’ has outlined a strategy for increasing the tax kitty under Tax Deducted at Source (TDS), for which perks to top executives are being seen as a potential source.

The report, seen by Business Line, has pointed out that the entire compensation structure of top executives should be examined. In 2005, the Fringe Benefit Tax was introduced to tax perks given to employees. After a lot of hue and cry, it was withdrawn in 2009.

Focus on E-Commerce

Another area where the CBDT wants the Income Tax department to concentrate is e-commerce, which has grown exponentially in the last five years. Advisory firms value India’s e-commerce trade revenues at $12 billion.

“E-commerce has emerged as a huge business in the past few years. This involves advertisements on the websites/portal of various organised and unorganised agencies, payments for job work such as building websites, translation of pages, data entry and research. This area promises to yield significant revenue,” the report said.

Payments to sub-contractors by infrastructure companies, catering contracts in star hotels, payments to event managers and for medical transcription services are also under scrutiny.

The CDBT wants the quality of tax assessments undertaken by IT officers to improve, because it has a direct bearing on the collections. It has asked officers to pay special attention to scrutiny cases of trusts and charitable originations. Cases of unaccounted income introduced in private limited companies as ‘Share Premium’, and profits declared by builders on project completion basis, need special attention, the report said.

(This article was published on July 7, 2014)
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