Hotel Bills Over Rs 20,000, Education Fee Over Rs 1 Lakh May Come Under Taxman’s Radar
Customers sit at tables at a cafe. (Photographer: Sanjit Das/Bloomberg)  

Hotel Bills Over Rs 20,000, Education Fee Over Rs 1 Lakh May Come Under Taxman’s Radar

Hotel bills above Rs 20,000, education fee over Rs 1 lakh, and purchase of jewellery and white goods valued above Rs 1 lakh may come under Income Tax Department’s scanner, according to proposed measures to widen the tax base.

The changes are being proposed in the department’s reporting of transactions framework—that flags high-value transactions of individuals—by expanding its scope to improve compliance, according to a tweet by the Ministry of Finance.

High-value transactions at present are required to be filed in ‘Statement of Financial Transactions’ by entities such as banks, mutual funds, among others, according to regulations of the Income Tax Act. For instance, cash deposits of over Rs 10 lakh, credit card payments of over Rs 1 lakh or more in cash, among others, are to be reported by banks to the taxman. High-value transactions are reported to the Income Tax Department so that such transactions don’t skip payment of tax.

The government is now proposing to expand the scope of reporting high-value transactions in a push to improve compliance and transparency.

Transactions that are proposed to come under taxman’s radar:

  • Payment of education fee and donations above Rs 1 lakh per annum.

  • Electricity consumption above Rs 1 lakh per annum.

  • Domestic or foreign business class air travel.

  • Payment to hotels above Rs 20,000.

  • Purchase of jewellery, white goods, paintings above Rs 1 lakh.

  • Payment of property tax above Rs 20,000 per annum.

  • Life insurance premium, health insurance premium above Rs 50,000 and Rs 20,000, respectively.

  • Share market transactions and details of bank lockers.

It’s also being proposed to collect tax at a higher rate from those who carry out high-value transactions, but don’t file income tax returns by showing less income, according to the same tweet.

A person making bank transactions above Rs 30 lakh should mandatorily file income tax returns, along with all businesses having a turnover of Rs 50 lakh, according to the proposed changes.

But taxpayers won't have to file this information themselves in the income tax return, a government official clarified on Sunday. Instead, the official said on the condition of anonymity that information of these transactions would be collected by third parties or reporting entities such as banks.

The reporting of more high-value transactions, according to the official, is being proposed to identify non-filers of income tax returns or those whose income disclosed in tax returns is not proportionate to their spending.

The tax department is relying on voluntary compliance, and identifying tax evaders is essential, the official said. The expenditure data collected through the 'Statement of Financial Transactions' are most effective and non- intrusive method to identify non-filers of income tax returns, he said.

The proposed measures, according to the official, are not intended to examine the affairs of honest taxpayers.

The tax department has recently launched a revised Form 26AS—an annual tax statement—that reflects details of all high-value transactions by a taxpayer. The change was implemented to push voluntary compliance, and ease e-filing of returns so that these transactions are included in calculating the correct tax liability while filing returns. Once these proposed changes are introduced, hotel bills over Rs 20,000, among others, could also feature in the Form 26AS for disclosure by taxpayers.

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