Every citizen whose income is above the tax exemption limit is responsible for paying his/her share of taxes. Indian laws levy huge penalties on tax payers in case of under-reporting or non-disclosure of income and assets in the country. Also, to curb tax evasion on income from foreign assets, the Tax Department has mandated a set of tax payers (Resident and Ordinary Residents) to report the details of foreign income and assets while filing the income tax returns. In case of non-disclosure, they will be liable to pay tax under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015.

But despite the tough laws and stringent disclosure requirements, many manage to escape the taxman’s eye.

To encourage people to report such tax-evasion cases, the government recently introduced the Income Tax Informants Reward Scheme, 2018, suppressing the former 2007 scheme. It rewards a person up to ₹5 crore for handing out specific information on evasion of tax. The tax evasion could be on income and assets in India and/or abroad. The identity of the informant, the information shared and the amount of reward is kept confidential.

What can be reported

The scheme does not reward reporting of all cases of tax evasion. Reward is granted only if the information reported leads to the evasion of taxes of not less than ₹ 5 crore of undisclosed income in Mumbai, Delhi, Kolkata, Chennai, Hyderabad, Ahmedabad, Pune or Bengaluru; the threshold is lower at ₹1 crore at any other place. By setting a high threshold, the authorities seem keen on avoiding reporting of frivolous cases.

The reward amount will depend on the additional taxes levied on the defaulter. This is in turn attributable to the information furnished by the informant. The risk and trouble undertaken, and the expenses incurred by the informant in securing and furnishing the information is also taken into account while determining the reward amount.

Since the assessment of a case could drag on for months, the reward may be granted in two stages — interim and final.

If the information shared pertains to undisclosed foreign income or assets of a defaulter liable under the Black Money Act, the interim reward could be up to 3 per cent of the additional taxes, subject to a ceiling of ₹50 lakh. The final reward in such cases cannot exceed 10 per cent of the additional taxes levied and realised, subject to a ceiling of ₹5 crore. Remember, the amount of interim reward will be deducted while granting the final reward.

In case the information shared is about undisclosed income or assets liable under the Income Tax Act, 1961, an interim reward of up to 1 per cent of the additional taxes realisable will be granted, subject to a ceiling of ₹10 lakh. If specific information of unaccounted or undisclosed cash is given which leads to seizure of cash exceeding ₹1 crore, the ceiling of interim reward will be set higher at ₹15 lakh.

The final reward in such cases will not exceed 5 per cent of the additional taxes levied and realised, subject to a ceiling of ₹50 lakh.

Modus operandi

To be eligible for the reward, one has to submit the relevant information (documents, records, emails, etc) to the Director General/ Principal Director/Joint Director (JD) of the investigation wing of Income Tax Department.

Names and addresses of the officers can be obtained from Annexure B of the scheme, which can be downloaded from the department’s website. If the JD believes the information shared supports and can lead to detection of substantial tax evasion under the I-T or the Black Money Act, the informant is requested to submit the information in the prescribed format in Annexure A. Alongside, an informant code is also allocated to ensure confidentiality. Thereafter, the person will be identified only with the informant code. If an informant wishes to furnish the information about more than one case of tax evasion, Annexure A has to be filled and signed separately for each such case. However, the informant code will remain the same.

There could be chances that a group of people work together to report tax evasion by a particular tax payer. The reward payable in such cases shall be disbursed in equal proportions unless otherwise required by the informants.

But beware, furnishing false information or evidence can cost you dear. Considered an offence, the informant could well be liable for prosecution.

Related Topics
comment COMMENT NOW