Budget 2012: Pranab Mukherjee cracks down on tax evaders
Finance Minister Pranab Mukherjee has imposed tax deduction at source on real estate deals and gold transactions in cash to step up the government’s crackdown against black money.
By SMRITI SETH, ET Bureau | Updated:
Finance Minister Pranab Mukherjee has imposed tax deduction at source on real estate deals and gold transactions in cash as part of measures to step up the government’s crackdown against black money. The Union Budget has also made tax returns compulsory for individuals owning assets abroad. Individuals will also have to present records of such assets for up to 16 years if demanded by tax officials.
Besides, unaccounted for assets found during a search will attract heavy taxes. “Tax evaders should now be very careful,” said Sudhir Kaushik, co-founder and CFO of online portal TaxSpanner. “The government has rightly targeted these assets.” Any transfer of immovable property, except agricultural land, worth over Rs 50 lakh in urban areas and over Rs 20 lakh elsewhere will be subject to 1% TDS.
Budget at ET: Budget 2012 | Union Budget | Live Union Budget Blog | Railway Budget 2012 | Budget News | Economic Survey of India
Similarly, a 1% tax on cash transactions of bullion and jewellery worth over Rs 2 lakh will also be deducted at source. The withholding taxes on gold and property, the two most popular assets favoured by tax evaders, will be effective from July and October, respectively. “By imposing withholding tax on these transactions the government has ensured early reporting in the system, since all withholding taxes are electronically recorded,” said Rahul Garg, executive director (direct taxes), PwC. But experts are not fully convinced about the effectiveness of these measures.
“It will be very difficult to enforce these. How will the government know whether or not individuals are holding assets abroad?” asks Garg. According to Kaushik, it is unrealistic to expect even clean individuals to retain such record for over 16 years. Kaushik said the proposal is fraught with loopholes that tax evaders would be able to exploit. “Buyers will tend to buy gold in smaller denominations and in multiple transactions. It is difficult to effectively control tax evasion unless the government imposes strict penalties.”
In an attempt to implicitly incentivise voluntary disclosure of income, the government has proposed a tax ranging from 30% to 90% on any unexplained sum of money, credit, investments or expenditures discovered by tax officials during the course of a search. The holder will be liable to pay this tax irrespective of the income bracket. “The government has made tax evasion less attractive by increasing the impact of the liability on undisclosed sums of money,” said Rajesh Srinivasan, Leader GES, Deloitte India.
Although these measures seem stringent, experts are wary of the problems associated with their implementation. “These steps will be ineffective in the absence of immediate administrative developments. The government needs to electronically integrate all data networks to improve efficiency,” said Garg.
Besides, unaccounted for assets found during a search will attract heavy taxes. “Tax evaders should now be very careful,” said Sudhir Kaushik, co-founder and CFO of online portal TaxSpanner. “The government has rightly targeted these assets.” Any transfer of immovable property, except agricultural land, worth over Rs 50 lakh in urban areas and over Rs 20 lakh elsewhere will be subject to 1% TDS.
Budget at ET: Budget 2012 | Union Budget | Live Union Budget Blog | Railway Budget 2012 | Budget News | Economic Survey of India
Similarly, a 1% tax on cash transactions of bullion and jewellery worth over Rs 2 lakh will also be deducted at source. The withholding taxes on gold and property, the two most popular assets favoured by tax evaders, will be effective from July and October, respectively. “By imposing withholding tax on these transactions the government has ensured early reporting in the system, since all withholding taxes are electronically recorded,” said Rahul Garg, executive director (direct taxes), PwC. But experts are not fully convinced about the effectiveness of these measures.
“It will be very difficult to enforce these. How will the government know whether or not individuals are holding assets abroad?” asks Garg. According to Kaushik, it is unrealistic to expect even clean individuals to retain such record for over 16 years. Kaushik said the proposal is fraught with loopholes that tax evaders would be able to exploit. “Buyers will tend to buy gold in smaller denominations and in multiple transactions. It is difficult to effectively control tax evasion unless the government imposes strict penalties.”
In an attempt to implicitly incentivise voluntary disclosure of income, the government has proposed a tax ranging from 30% to 90% on any unexplained sum of money, credit, investments or expenditures discovered by tax officials during the course of a search. The holder will be liable to pay this tax irrespective of the income bracket. “The government has made tax evasion less attractive by increasing the impact of the liability on undisclosed sums of money,” said Rajesh Srinivasan, Leader GES, Deloitte India.
Although these measures seem stringent, experts are wary of the problems associated with their implementation. “These steps will be ineffective in the absence of immediate administrative developments. The government needs to electronically integrate all data networks to improve efficiency,” said Garg.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
Related Articles
Pranab Mukherjee had towering contribution: Himanta Biswa SarmaADVERTISEMENT
