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Shopping now a taxing affair
Freny Patel & Subhomoy Bhattacharjee in Mumbai/New Delhi |
July 12, 2004 08:40 IST
The next time you go on a shopping spree, do make a note of all that you have bought -- be it a television set, a refrigerator or even a toy.
By the end of this financial year, the taxman will want a detailed account of your investments and expenditure.
This exercise is meant to widen the tax base and, more importantly, track income-tax evasion, say taxmen.
If you fail to furnish the information, you'll have to pay a penalty of Rs 100 a day. Effective from April 1, 2005, the income-tax department will insist on the filing of an annual information return (AIR) for financial transactions worth Rs 50,000 or more during the year.
This means when you buy a 21-inch television worth Rs 13,000, a 1-tonne air-conditioner costing Rs 15,000, a frost-free refrigerator priced Rs 16,000, and decide to invest in two fixed deposits of Rs 10,000 each, you will have to furnish the information to the tax authorities.
The annual information return has to be furnished either on a floppy, CD-Rom or any computer-readable media.
Hidden in the fine print under the heading "widening of tax base", the Finance Bill 2004-05 has added three sub-sections to Section 285BA.
The new clause makes it compulsory for all "who enter into any specified financial transaction to furnish an annual information return" in "any computer-readable media as may be prescribed". This is applicable to any individual who enters into a financial transaction.
The annual information return plan was flagged off by former Finance Minister Jaswant Singh in the Budget for 2003-2004.
However, no mechanism was set in place to enforce the furnishing of annual information return.
The annual information return data can now be fed into the Tax Information Network, which will be the central clearing house for all tax data. The income-tax department will, therefore, be able to track high-value transactions in the economy, and check if tax has been paid on them.
The income-tax department did not have this kind of expenditure data. It solely depended on income details like salary and other income to trace tax evasion.
However, income-tax experts are still grappling with the definition of "transaction". "Will it be applicable to buying vegetables, provisions or milk. We do not know," says a tax consultant.According to the clause, specified financial transactions have been defined as "transaction of purchase, sale or exchange of goods or property or right or interest in a property, or a transaction for rendering any service... or a transaction by way of an investment made or an expenditure incurred."