CBDT Directs I-T Dept to Monitor High-Value Cash Transactions at Hotels and Hospitals
Introduction
The Central Board of Direct Taxes (CBDT) has instructed the Income Tax (I-T) department to monitor cash transactions in high-value sectors, including hotels, luxury brand retailers, hospitals, and IVF clinics. This directive aims to address the rising trend of large cash transactions and ensure compliance with tax regulations. Furthermore, the Central Action Plan (CAP) 2024-25 outlines strategic measures to tackle these issues effectively.
Focus Areas for Verification
The CBDT emphasizes adopting a “non-intrusive” approach to verify cash transactions, particularly in high-risk sectors. Specifically, the focus areas include:
- Hotels: High-end establishments frequently handle substantial cash transactions.
- Luxury Brand Retailers: Large purchases of designer clothing and luxury goods occur regularly.
- Hospitals: Private and high-end healthcare facilities often manage significant transactions.
- IVF Clinics: These clinics are known for substantial payments, often involving cash.
Additionally, transactions exceeding Rs 2 lakh should be reported via a Statement of Financial Transaction (SFT) by financial institutions. Despite this, many institutions fail to comply, leading to widespread circumvention of these regulations.
Improving Reporting and Compliance
The CBDT has identified gaps in compliance with Permanent Account Number (PAN) requirements under Section 139A. Currently, no robust mechanism ensures adherence to these regulations. Therefore, the CBDT urges the I-T department to enhance the verification process and identify potential sources of rule evasion. By improving these procedures, the CBDT aims to strengthen overall compliance.
Recent Findings and Actions
In the fiscal year 2023-24, the I-T department conducted 1,100 searches and raids nationwide. These actions resulted in asset seizures totaling approximately Rs 2,500 crore, including Rs 1,700 crore in cash. This data underscores the extensive use of cash and highlights the urgent need for stricter monitoring. Moreover, the CBDT has identified new opportunities to expand the taxpayer base through data mining and analytics. Utilizing these tools effectively could reveal non-filers and discrepancies between income tax returns (ITRs) and financial transactions.
Targets and Measures for Tax Compliance
The CBDT has set an ambitious target to increase the number of tax return filers by 10% this fiscal year compared to the previous year. This goal aligns with the broader objective of expanding the tax base and enhancing compliance. Additionally, the CBDT is addressing the escalating arrear demand, which surged from Rs 24.51 lakh crore on April 1, 2023, to Rs 43 lakh crore on April 1, 2024. Consequently, urgent action is necessary to manage and reduce these arrears effectively.
Formation of Special Teams
To tackle the arrear demand crisis, the CBDT has mandated forming special teams led by a Principal Commissioner of I-T in each region by the end of September. These teams will focus on recovering tax arrears from the top 5,000 cases, which represent approximately 60% of the total demand. By thoroughly analyzing physical records and details, these special teams will expedite the recovery process.
Conclusion
In summary, the CBDT’s latest action plan represents a concerted effort to address high-value cash transactions and rising tax arrears. By focusing on high-risk sectors and employing advanced data analytics, the CBDT aims to enhance tax compliance and reduce arrears to manageable levels. Ultimately, these measures will contribute to a more efficient and effective tax system.
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