The government is tightening noose on tax evaders by strengthening its Tax Deducted at Source (TDS) system. The focus on technology-based processing is so much so that Finance Minister P Chidambaram did not wait for the Centralised Processing Cell (CPC) for TDS at Ghaziabad to become fully operational and found time to launch it just a week before the Budget. Next, he widened the net of source-based tax deduction in his Budget speech and brought transfer of immovable property under TDS.

As the finance minister proposed to make e-filing mandatory for more categories of assesses, an increase in online returns would leave more data at the disposal of the CPC (TDS), which is likely to play a major role in 360 degree profiling of a taxpayer and nab tax evaders. CPC will analyse data and take out patterns like habitual defaulters. The defaulters would be warned electronically to take corrective action. It will also provide data on foreign remittances on which TDS has to be deducted.

“Compliance level will go up. Presently, people are not complying because they are not being watched. A sizeable percentage of deductors is not reporting or under reporting,” a tax official said.

About 40 per cent of the total direct tax collections come in the form of TDS. Collections this year are estimated at Rs 6,68,109 crore. This means about 2,67,243 crore will come from TDS is the target is met.  

The CPC will address the problems faced by employees when their employer deducts the tax but does not deposit it with the government. Last year, some employees of Kingfisher Airlines’ had received tax notice from for non-payment of their TDS. The CPC will provide a TDS certificate to the employer and the employee can check its authenticity on the Cell’s website.

“If the deductor deducts tax but doesn’t submit it or pays less TDS, both the department and the employer can easily find out. We will match the challan reported by bank to the challan reported by the deductor. If the data doesn’t match we will ask the deductee to make the payment,” the official said.

Earlier, the job of CPC was being done by NSDL and the income tax department but there were issues of data synchronization. While the tax department was handling defaults, NSDL was responsible for Form 26AS. In case of any mismatch in the Form 26AS and the tax payment, there was no mechanism to flow it back and change the Form entries. Now everything is under one environment.

Spread over about 40,000 square feet on four floors the swanky office has strength of about 250 people, including staff of technology partner Infosys. This is the first CPC for TDS as the CPC in Bengaluru is only for processing electronically-filed income tax returns. It started pilot runs in November 2012.

The CPC has a 35-seater call centre which is receiving roughly 2,500 calls per day. It will process over 400 million TDS applications filed by about 1 million entities annually.

It will enable real-time reconciliation of TDS filings and refund claims, instant detection of erroneous claims and faster payment of verified claims. It may also lead to significant savings for the government by reducing the interest accumulation on delayed tax refunds.

Besides TDS at 1 per cent on transfer of immovable property where consideration exceeds Rs 50 lakh, the Budget also proposed to expand the scope of annual information returns, extend e-payment facility through more banks, and extend the refund banker system to refunds of more than Rs 50,000. (Business Standard)