Amendments in the Income-Tax Manneri

On 14th August 2020, Prime Minister Modi launched the ‘Transparent Taxation' platform, which basically intended to streamline the traditional tax-payment mannerisms and lacked a logical and simple procedure for people to reduce the possibilities for corruption and their way of overreaching to the officials. Additionally, the union government has proposed to lessen various thresholds for various transactions for the purpose of necessary tax disclosure.

Further to retain a close eye on problems like tax evasion, various types of purchase like goods, property tax, medical and life insurance premium payments and travelling in business class airlines (domestic or foreign) and hotel bill payments will be encompassed as per the new proposal.

Therefore it means that where a person pays for his hotel bill or medical insurance premium above the amount of  Rs. 20,000, or if he will incur expenses beyond Rs 50,000 on life insurance premiums or where the bills related to Rs.1 lakh for school fee, white goods, jewellery, or paintings, then the establishment to which he/she has made the payment shall be obligated to inform the government regarding all such transactions as per the new reforms.

Even expenses like property tax and electricity bill payments filed and submitted to the government shall also be required to be informed to the Government of India if they exceed Rs 20,000 and Rs 1 lakh respectively. Such details shall be reflected in a new form Form 26 AS, which prescribes details related to an individual’s tax account statement.

What was the situation earlier?

Earlier, details related to larger amounts of the transactions in higher amounts were normally attached with the financial sector entities like banks, Demat accounts and more etc. However, the Ministry of Finance now intends to keep a close eye under Income-Tax Act so that the practices of tax-evasion should be eliminated and voluntary tax payments could be encouraged.

The resolve of Government to fulfil its aim could be understood from the fact that even small payments like school fees, goods or painting purchases above Rs 1 lakh would be needed to be presented and reported under Income Tax provisions would be reported and even bank account deposits would be checked.

Likewise in present, purchases of property having a value above Rs 30 lakh, or in a matter of investments above Rs 10 lakh invested in securities like shares, mutual funds, demat, credit card and fixed deposit transactions of amount above Rs 10 lakh were necessary to be informed. For a similar purpose, multiple notifications were raised and sent to the assesses to check whether they actually have made any such high-end transactions in reality.

If a taxpayer has really made such a transaction he merely needs to log-in his account to approve whether the notified transactions have been made by him or not. Once he does so, it will either validate or drop the transaction,  and consequently, the tax department will double-check the transaction with the income tax returns(ITR).

The IT Department seeks details from the taxpayers such as cash deposit/withdrawal from saving bank accounts, sale/purchase of immovable property, credit card payments, purchase of shares, debentures, foreign currency, mutual funds etc. Any further extension in financial transactions would mean such reportage of transactions beyond limits shall be under the overseeing capacity financial institutions.

The 2020-21 Budget introduced the form 26AS in the revised format announced earlier which asked for all information from the taxpayers unlike before. Form 26AS is an annual consolidated tax statement that can be retrieved from the income-tax website by the individual assesses using their PAN numbers. The new reforms under “Transparent Taxation” shall be applicable from September 2020.

Author:

eStartIndia Team