Over the years, income-tax (IT) authorities in India are progressively employing new and divergent methodologies to spot tax evaders, putting the menace of tax evasion behind.
However, such methodologies have so far have very limited effect in eradicating tax evasion - the tax evaders are always found to be a step ahead, outclassing the IT authorities. This is achieved by using loopholes in the system and adopting innovative ways to break free from the clutches of the IT authorities without getting caught on account of tax evasion.
Now, however, the central government has become a bit proactive and is taking the bull by its horns. Work is in progress to develop a unique process to appraise the taxes based on the expenses incurred by the tax payers via integration of advanced/emerging technologies into tax assessment.
Accordingly, the central government has established tax tracker software to evaluate the expenses of all tax payers based on the inputs generated from the big data analytics.
Tax tracker software is a result of many years of hard work / commitment of the central government towards eradication of the menace of tax evasion. The said software costs the central government around Rs. 10 billion. As per the available reports, access to this tax tracker software has been provided to the IT authorities on March 15, 2019.
The outstanding advantage of the software is that it will arm the IT authorities with unique financial information of each tax payer by tracking down the expenses incurred by each tax payer in a given financial period.
With the assistance of tax tracker software – IT authorities will have adequate wherewithal of detecting the discrepancies amid the revenue reported in the IT filing from the actual expenditure of the tax payer during the financial year.
This software will serve as a data repository for the IT authorities to access and verify the financial information (furnished/unfurnished) related to persons and companies.
Another advantage is that IT authorities will be capable to trail the undisclosed income/expenses of each tax payer without having to resort to such tax payer for such information.
The new tax assessment process will have integrated information management system that will simplify the process of data collection related to tax payers - most importantly it will compile accurate data of income/expenditure of each tax payer.
With the inception of tax tracker software - India joins the elite league of few countries which are already using tax tracker software to monitor and control the prospect of tax evasion.
The phenomenal success of tax tracker software in Britain is the key driver of the government’s confidence in the functionality/ efficiency of the said software in curbing the menace of tax evasion. Britain had launched the tax tracker software about a decade back at an estimated cost of 100 million pounds and this has prevented 4.1 billion pounds of revenue loss so far.
The tax tracker software will authenticate all the IT returns and potentially expose the discrepancies in the IT filings and undisclosed income/expenditure of each tax payer. Based on the tax assessment provided by the tax tracker software, the IT authorities will crack down the tax evaders.
Tax payers should be aware of the new tool in the armor of IT authorities and should pay all statutory tax dues without fail to evade the prospect of getting punished for tax evasion - the probability of escaping from the radar of IT authorities is getting reduced by the day.
Bhumesh is the Managing Partner of Corp Comm Legal, an Indian law firm. He is ranked among the Top 100 Indian corporate lawyers. He is advising domestic and foreign companies on M&A, joint ventures, corporate - commercial issues. Besides, he has written a book on Drafting of Commercial Agreements, has a couple of books in pipeline and trains students and professionals on Drafting Skills and corporate laws. He writes regularly on legal, business & other issues and is a guest faculty lecturer with educational institutes. Bhumesh holds a Bachelor of Laws (LLB) from the University of Delhi and a further qualification in International Law and Legal Studies from College of Law, York.