Finance Minister Arun Jaitley has done well by announcing in his Facebook post on Sunday that the government is planning to link permanent account number (PAN) with cash transactions to combat blackmoney.
By: Santosh Tiwari | October 5, 2015 3:36 PM
In a country of more than 120 crore people, only 3.6 crore file income tax returns despite more than 17 crore having PAN. Extensive use of PAN and its linking with Aadhaar is a key tax reform for curbing tax evasion and blackmoney.
Finance Minister Arun Jaitley has done well by announcing in his Facebook post on Sunday that the government is planning to link permanent account number (PAN) with cash transactions to combat blackmoney.
Linking of cash transactions with PAN would mean that the records of any cash transaction beyond a certain limit could be accessed by the Income-Tax Department – while this will help find out the tax evaders, it will also act as a deterrent and shut this major window for blackmoney operations.
The FM’s Facebook post has obviously been to tell people what the NDA government is doing to tackle black money after embarrassing results of the three-month compliance window which saw the disclosure of just Rs 3,770 crore; but the direction in which the government is moving now, though delayed, will yield good results if the steps he has outlined are pursued judiciously.
Jaitley has said: “The Government is at an advanced stage in considering the requirement of furnishing PAN card details if cash transactions beyond a certain limit are undertaken. The monitoring regime of income tax has been strengthened and its capacity to access information and apply technology driven analytical tools to expose evasion, has been enhanced. Its ability to detect large cash withdrawals, or large cash transactions which enter the system, is being strengthened. GST regime once introduced will also be a landmark step in this direction. Thus for commodities like gold where the initial purchase by the exporter is after the payment of custom duty, the subsequent transactions which are mostly in cash, can easily be found out”.
Going forward, it is quite clear that the government might also look at restructuring the personal income tax rate structure to address the issue of the highest tax rate of 30% kicking in at a low income of Rs 10 lakh – it should kick in at a higher income – and also enhanced promotion of plastic money.
The government must take note of the Tax Administration Reforms Commission (TARC) report’s suggestion here.
The Commission in one of its report submitted to the finance ministry in November 2014 pointed out that, “India has a low taxpayer base even as a percentage of the total population. With a population of over 120 crore, only 17 crore have a PAN and of these, about 3.6 crore file income tax returns. Only 3.3 per cent of the population pays tax, which is very low compared to 39 per cent in Singapore, 46 per cent in the USA, and 75 per cent in New Zealand. This, of course, reflects India’s low income levels, which, for a large part of the population, falls below the basic income tax threshold; yet huge potential remains to expand the taxpayer base… the base could perhaps be doubled at most to say 7 per cent”.
The Income-Tax Department has already started linking Aadhaar numbers to PAN through e-filing of tax returns to make the refund process easier and a non-intrusive handling of the taxpayers – 3,492,298 returns are already PAN-Aadhaar linked – and this process needs to be extended as far and wide as possible.
First Published on October 05, 2015 11:24 am