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Benami property: Government on a data trail

Maulik Madhu | Updated on January 16, 2018 Published on December 04, 2016

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The IT department’s database can be tapped to pick out suspected benami transactions

Every time you splurge on some big-ticket item or make a substantial investment in an asset, do remember it does not go unnoticed by the tax authorities. And while not all high-value transactions may involve unaccounted income, they can most certainly provide clues to tracking down the suspicious ones.

Treasure house of information

The Income Tax Act mandates entities such as banks, mutual funds, companies and registrars and sub-registrars to regularly furnish information — Annual Information Report (AIR) — on certain high-value transactions to the tax authorities. For instance, banks, non-bank finance companies and post offices report your time deposits (excluding the ones that have been renewed) if they total ₹10 lakh or more in a financial year. Likewise, companies and mutual funds (MF) have to furnish information if you buy shares and MF units each worth at least ₹10 lakh a year. Also, professionals and businessmen (with income exceeding a certain amount) have to report their cash receipts exceeding ₹2 lakh from any person in lieu of sale of goods or services. In July, the tax department despatched seven lakh letters to parties involved in fourteen lakh high value non-PAN transactions asking them to furnish their PAN details. These were dug out from the AIRs.

A tab is kept on high-value transactions also by way of TCS (tax collected at source) and TDS (tax deducted at source). While TCS works on the expenditure side, TDS works on the income side.

A seller levies TCS on you whenever you buy certain high-value items. So, every time you buy bullion exceeding ₹2 lakh or jewellery exceeding ₹5 lakh in cash, the seller has to collect 1 per cent TCS from you.

Sales in cash of any other good or service exceeding ₹2 lakh too come padded with the TCS. Likewise, several transactions listed under sections 192 to 194 of the IT Act attract TDS (tax deducted at source). For instance, if you buy property with a value exceeding ₹50 lakh, you have to deduct 1 per cent TDS before paying the seller. Lottery and other game winnings exceeding ₹10,000 too require deduction of TDS before the money is paid out.

Since both the TCS and the TDS collected have to be deposited with the tax department, it ensures that the associated transactions get reported.

Untapped potential

There’s yet another way, albeit under-utilised, in which the IT department keeps an eye on you. That is by way of mandatory quoting of the PAN. If you sell/purchase property exceeding ₹10 lakh, make a one-time payment exceeding ₹25,000 at a hotel/restaurant, deposit cash exceeding ₹50,000 in a day with a bank or purchase foreign currency exceeding ₹50,000, you have to quote your PAN. But, unlike the transactions that form part of the AIR and those that attract the TCS or the TDS, those requiring the PAN to be quoted do not always find their way to the tax department. According to SR Wadhwa, former Chief Commissioner of Income-tax and Chairman, Income Tax Settlement Commission, this information is not being passed on in a systematic manner by all and compliance may be only 20-25 per cent. He, however feels that since the PAN has been furnished, there is a fear among people that the transaction will come to the knowledge of the tax department.

“The IT Act (Section 139) and the rules (114B, 114D and 115C) under it require the seller to verify the PAN and then furnish a statement to the IT department on transactions beyond a certain threshold. While rules exist they are not being fully enforced,” says Amit Maheswari, Managing Partner, Ashok Maheshwary and Associates. But, with the government going full throttle on unearthing benami transactions, compliance with data submission as mandated under the IT Act is likely to be enforced strictly, sooner rather than later.

Data analysis

So, how will the IT department sift through this massive database for benami deals? The IT department uses computer-aided scrutiny selection where some parameters are used based on which cases will be selected and then scrutinised. Notices will be issued to people whose transactions appear benami and details will be called for. According to one Assistant Commissioner of Income Tax, it may not be possible to catch each and every person because the number of transactions is humongous and manpower is limited. So, selective ones that match certain criteria will be pursued. So, if you have been cleverly laundering your black money, get ready for sleepless nights for the taxman has enough data to catch you.

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Published on December 04, 2016
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