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The Income-Tax Department’s latest stern warning, served on salaried taxpayers, shows up, at one level, the clinical efficiency of the taxman in plugging even the smallest loophole in compliance procedures as part of the effort to crack down on tax evasion. In its advisory, the department cautioned salaried taxpayers against under-reporting incomes and claiming inflated deductions and exemptions in their tax returns. Such wrongful claims, it said, would be treated as tax evasion, and would consequentially invite all the penal provisions that accompany such a characterisation.
The advisory was evidently prompted by the unearthing of a fraud centred around claims of tax refunds on the strength of bogus documents filed by a Bengaluru-based chartered accountant on behalf of employees at leading corporates. The accountant helped these salaried employees file revised tax returns in which inflated claims of losses from house property were made: this effectively lowered the employees’ tax liability, and set them up for refunds under false pretences. The fraudulence is now being investigated by the CBI, but the complicity of some tax officials in the perpetration of the fraud is suspected.
The Tax Department’s tenacity in sniffing out such instances of fraud is doubtless worthy of admiration. And yet, some of the other actions in the space of wider tax compliance among salaried employees convey an excessive preoccupation with extracting every marginal tax rupee from the honest taxpayer. The decision by the Authority for Advance Rulings to subject employee reimbursements to Goods and Services Tax has already set off efforts to restructure compensation packages. Taken with the additional disclosures being sought in the new ITR forms, including a break-up of salary components, the perception that the salaried taxpayer, who is in any case subject to tax deduction at source, is the favourite whipping boy of the taxman will only be strengthened by such actions, which betray a wholesale lack of trust.
Associate Editor
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