Finance ministry sources on Sunday defended the proposal to bring some "high value transactions" under the income tax scanner even as the government had on Friday withdrawn the tweet which talked about the proposal to bring certain transactions such as Rs 20,000 spent on hotels under the income tax scanner.
Sources clarified that onus of reporting such transactions will not fall on the taxpayer, but third parties. This would not lead to any modification in the income tax returns, they said.
The tweet was put up by mygovindia, a platform founded by the government to promote the active participation of citizens in country's governance and development, on Thursday.
On a day the Prime Minister unveiled taxpayers' charter and expanded faceless assessment to the entire country, the tweet had stirred a controversy.
According to the tweet, the government has proposed to include life insurance premium above Rs 50,000, health insurance premium over Rs 20,000, foreign travel, education-related fees, and donations above Rs 100,000 in a year in the list of Statement of Financial Transactions (SFT). Other transactions proposed to be included are purchase of white goods, jewellery and paintings over Rs 100,000, and demat accounts and bank lockers.
The finance ministry sources said that with the changing facets of taxation in India towards a faceless approach, it has become even more imperative for the income tax department to have a broader specified financial transaction (SFT) report by third parties over those who undertake high value transactions but still do not pay income-tax.
For example, a person who is paying school fee or donation of say Rs 5,00,000 per annum and still does not file income-tax return by claiming that his income is not taxable, he is actually trying to dodge the income-tax system as the proposal talked about bringing transactions worth Rs 1,00,000 for school or college fee under the income tax scanner.
Similarly, the sources said people who have made purchases of luxury items or spent sizeable amount for hotel bills are potential taxpayers and should file income-tax returns.
Finance ministry sources said, there is no such proposal to modify income tax returns forms.
The taxpayer would not need to mention his high value transactions in the return.
"The reporting of high value transactions to the income tax department is to be done by the third parties under income tax Act.
Also, it is the most non-intrusive way to identify those who spend big money on various items such as business class air travel, foreign travel, spend big money in expensive hotels, send their children to expensive schools and yet they do not file income tax return claiming that their income is less than Rs 2.5 lakh per annum," they said.
The sources said the income tax department is relying more on voluntary compliance and therefore it becomes essential to identify tax evaders. For that purpose, expenditure data collected from third parties through SFT is the best and most effective non-intrusive method.
Any purported extension in the present list of SFTs, as reported in media, is certainly not going to impact or affect the taxpayers as they are not required to file details of high value transactions in their ITRs, they said.
The information will be used to identify those who are either not filing the returns or the income disclosed in the returns are not proportionate to the pattern of expenditure reported in the SFTs. Such exercise will be done through data analytics and artificial intelligence, they said.
"There will be no manual intervention in such exercise," the sources said.