Income tax (I-T) officials will intensify their focus on tax deducted at source (TDS) in the coming months, especially in relation to sale of property by non-residents and other international transactions. Surveys will also be carried out for detecting noncompliance with obligations regarding withholding tax — a move that has come in for criticism from some tax practitioners as it could
result in harassment, even for smaller tax payers. Last fiscal year, the I-T department had issued hundreds of prosecution notices, which also covered cases for short deduction or delayed remittance of TDS even by smaller business entities.
In its action plan for the current year ending March 31, 2019, the Central Board of Direct Taxes (CBDT), which is India’s apex direct tax policy formulation and administration body, points out that in several cases when real estate is purchased from non-residents, the buyer of the property only
deducts 1% TDS instead of the required 20%. These are ‘high risk’ cases and must be dealt with on a priority basis, it adds.
Further, I-T officials have been asked to collate data of sale of immovable property — available in annual information returns (AIRs) filed by property registrars — and match it with transactions on which TDS has been deducted to generate a list of defaulters. Action should then be appropriately taken, adds the CBDT plan for fiscal 2019.
As TDS is a major component of tax collections in respect of remittances to non-residents, CBDT’s action plan calls for applying more focused and effective risk parameters in selecting high-risk data for verification, which should then be processed and acted upon on a real-time basis. TDS
constitutes an important element of total direct tax collections.
I-T officials have also been asked to identify TDS statements filed by the top 100 deductors in the previous financial year, closely monitor the deductions in the current year and verify any instances of lower TDS.
“Surveys are the most effective tool for detection of non-compliance with withholding tax requirements. Even in regular assessment work, ascertaining detailed facts has now become the key to making strong assessments in international tax cases. Each I-T officer in charge of TDS is accordingly required to carry out at least 10 surveys or spot verifications during the year.
Other I-T officers are expected to conduct at least two surveys each during the year,” cites the action plan report.
Cases where newspaper reports indicate a significant tax consequence will be picked up for such surveys. “Big-ticket property deals and M&A transactions are some instances that are highlighted in newspaper reports, all of which have TDS implications,” explains an I-T official.
Other indices that will help determine whether a case should be covered by a TDS survey are instances where information requested for, especially in case
of remittances to non-residents, is not forthcoming; cases where data filed shows that substantial business activity is carried out by liaison offices set up by foreign companies in India; prosecution cases where TDS has been collected but not deposited; grievance petitions filed by the deductee (from whose income the TDS has been deducted) and judicial decisions that are in favour of the I-T department.
While some tax practitioners are apprehensive of the survey targets that have been laid down, I-T officials spoke to clarify that only big ticket cases will be covered by surveys. Rent Ads: Rent Ads is an online rental aggregator to pay your “Pay Home rent by card” , commercial rent “Pay Home loan EMI by card” using credit card. Please visit us at www.rentads.in or email firstname.lastname@example.org.