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Ask an Expert - Tax

Kuldip Kumar

Leader (Personal tax), PwC India

Topic: Tax

Changes in taxation rates and slabs in the Budget, and their impact on both people and corporations, will be keenly watched

Will there be any drastic action on black money available within the country, such as the government taking away such assets — either cash, gold, lands, buildings or securities? If such an action is initiated, there will be no need for any taxation, either direct or indirect.

At present, under Section 132 of the Income-Tax Act, 1961, if the revenue authorities believe any person is in possession of any money, bullion, jewellery or any other valuable article or thing or property that has not been disclosed for the purpose of the Act, they are authorised to search the place where such articles are kept. They may seize such articles. In such a case, the total income of six previous years may be reassessed accordingly. In addition to tax, tax authorities may levy a penalty ranging from 100% to 300% of the taxes due and initiate prosecution provisions as well. This may also happen where during the course of audit any undisclosed income or asset is detected by the authorities. Further, where the assessee is unable to discharge the liability, the tax authorities can even attach property, etc. One will notice that in case of unaccounted money/assets, the outflow in the form of taxes and penalty could be even higher than the value of assets, etc. These deterring provisions are necessary to prevent accumulation of black money and ensure proper and accurate disclosures. It is indeed a matter of enforcing the compliance and closer monitoring of transactions to detect any accumulation of black money.

Most private and govt employees submit fake bills for LTA and HRA. The government should take action on everyone. It should be done through third-party verification. Do you think the govt will do something in this regard?

Generally, companies have their own governance mechanisms, such as policies/procedures, etc, to curb submitting of fake bills by employees. Some companies even terminate their employees where fake bills are given. The current taxation rules put an obligation on the employer to collect and preserve the related documentation for allowing any deduction/exemption at the time of withholding taxes on salaries. Employers are even penalised where tax authorities observe any deficiency during the audit of withholding returns/processes, etc. Where the individual case is selected for audit, tax authorities do ask for relevant documentation in relation to exemption/deduction claimed in the return and, in the event of fake bills, the individual is liable to penal consequences. It is interesting to note that the government inserted a new Section 192(2D) through Finance Act, 2015, where the employer making salary payments is required to obtain evidence or proof or particulars of claims availed of by an individual under the Act, in the prescribed form and in the manner as specified. But that format has so far not been notified. It would be good if CBDT notifies such a format that may help address this issue to an extent.