Budget 2016: Just get set for stricter tax laws, more disclosures

Although wealth tax has been abolished this year, one should get ready for a detailed disclosure of assets in the tax returns.
Be it e-filing of income tax returns or use of electronic verification mechanism, be it quick processing of tax refunds or even issuing of notices to those who have not filed their returns, it is the extensive use of technology which has emerged as the key trend. Although some procedures like mismatch of taxes can be submitted online, we may also see audit or scrutiny of returns getting done electronically. This will not only save time and effort but also help bring in transparency to the process.

Whether there will be dispensation from filing of the tax returns? Well, this too may not be out of sight, particularly for those who have simple returns such as salaried individuals where taxes are deducted and deposited by the employer or even for those having income from other sources where tax liability has been discharged through withholding by the payer of income.

These measures will not only result in some ease to taxpayers but also give more time to the authorities to focus on non-compliers. Those not filing the returns or entering into significant financial transaction where the value of investment is not commensurate with their tax return are likely to get noticed easily.
Government came out with a stricter law earlier this year to attack the black money stashed overseas. One time window provided for voluntary disclosures could not yield handsome collections. One could see authorities in action where they found one having undisclosed overseas income assets.

The tax returns forms have already been amended to seek detailed disclosure of overseas assets and bank accounts and those returns are expected to be scrutinised more closely.

India has recently joined the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information with a number of countries. Now bulk taxpayer information is expected to be periodically shared among those countries, thereby reducing the scope for someone to hide money overseas.

Even for the black money hiding in India, there are already certain provisions in law such as discouraging the use of cash transactions, mandatory quoting of PAN in certain transactions and so on.

But one could see more steps in that direction. The whole idea for these moves is to reduce the sphere where the black money is generated and or consumed.

Reduction in corporate tax rates as indicated in last year's budget is now being talked about. There was no such promise for personal tax rates, but where government is able to expand the taxpayers' base and strict compliances yield revenue growth, it may not be out of way to expect reduction in personal tax rates. Particularly when the present government may be looking to clinch another term in the next general elections.

The gap between the rich and the poor is high. Money needed for development will keep the government taxing the richer more. There is no inheritance tax as of now but the time to levy such a tax again may not be very far away.

Although wealth tax has been abolished this year, one should get ready for a detailed disclosure of assets in the tax returns.

Time has come to be ready to embrace such changes and the only way out for taxpayers seems to be complying fully with the law by paying taxes honestly and ensuring complete disclosures in the return. In addition, carefully maintaining and preserving the trail, documentation of financial transactions is vital so that he/she is always ready if any question is asked.

(The writer is Partner, PwC. Views are personal)
Source : ET wealth