With sophisticated technology now at their disposal, tax authorities are trying to be one step ahead of evaders.
The income tax (IT) department always had information at their disposal, using which they sent out notices to taxpayers.
But, most of these were looked at in silos.
They are now using technology like big data analytics to combine all the information and geta360degree income profile.
Earlier, if you purchasedahouse that didn´t match the returns filed, they would call for you to explain how you funded it. All you had to do then was show the assessing officer loan documents and statement of savings.
The same verification is now done withadeeper understanding of your income profile.
Now, the officer can look at your purchases and spending —likeacar, gold or credit card bills —and check if the savings you showed are justified or not.
Beyond deposits: The deposits made during demonetisation is only the starting point for investigations.
“The tax authorities are armed withalarge amount of data.
They are tracking investments, property buying, highvalue purchases and spends on credit cards,” says Shailesh Kumar, director –direct taxation, Nangia &Co.
All the information gathered is mapped toaperson´s Permanent Account Number (PAN). If you boughtaproperty, the information is linked to your PAN.
So are details of high spends and investment.
The data is collated, mined and analytics is used to track possible evasion.
It can be as simple as finding the total depositsaperson has made in several bank accounts to estimating the income mismatch by analysing tax returns, deposits, investments and spends.
Sophisticated technology:
Last year, the finance ministry launched Project Insight.
The implementation has started and will be completed by 2018.
It isatechnology platform that uses information to catch evaders, promote voluntary compliance and deter noncompliance.
Explains Chetan Chandak, head, tax research, H&RBlock India: The project has two modules -Income Tax Transaction Analysis Centre (INTRAC) and Compliance Management Central Processing Centre (CMCPC).
INTRAC uses technologies such as data integration, data processing, data quality monitoring, data analytics.
They show discrepancies in income.
If you purchasedaproperty worth Rs.1 crore but have showed income of Rs.5 lakh in your returns, an alert is generated for further investigations.
INTRAC will also mine the web and social media to pick information aboutaperson. If you post aboutaluxury trip and don´t file income tax returns, expectaletter from authorities seeking details of your income.
Experts say that it won´t be surprising if the tax department has created income models for individuals and businesses, like credit bureaus do. Ifaperson does not haveacredit history, the credit bureaus look at similar profiles of borrowers and predict the incomeanew borrower could have.
Then, they match the declared income with their prediction to check deviations, helping banks to assess the borrower better.
CMCPC handles preliminary verification, generates bulk letters or notices and followup on these.
In Operation Clean Money, the notices are sent by the CMCPC automatically, without human intervention.
The replies an assessee will provide for the notices, too, will get fed in the system automatically and analysed, based on which further investigations will happen.
Automation of notices means taxpayers don´t need to go to an assessing officer to provide relevant evidence.
It has also reduced the workload of tax officers, who are now focusing on areas where revenue leakages are higher, according to experts.
The finance ministry has maintained secrecy around Project Insight.
It´s done to avoid leakage on its functioning.
When the ministry floated tenders for the programme, all information technology companies bidding for it were made to signanondisclosure agreement.
Demonetisation has openedacan of worms: Withasubstantial portion of the ~15.4 lakh crore of cancelled ~500 and ~1,000 notes coming back into the system, the tax department suspects that evaders legalised their money using mules and proxies.
Many business owners have used backdated bills to justify the cash.
But, evaders weren´t only depositing cash by using various methods; they were also providing data to the authorities.
As the money came into banking channels, it can be tracked easily.
The details are now being used to catch such evaders and experts feel it´s tough to escape the department.
During demonetisation, deposits between Rs.2 lakh and Rs.80 lakh were made in about 10.9 million accounts, with an average deposit size of Rs.5.03 lakh.
Deposits of more than Rs.80 lakh were made in 148,000 accounts, with average deposit size of Rs.3.31 crore.
They are tracking investments, property buying, highvalue purchases and spends on credit cards,” says Shailesh Kumar, director –direct taxation, Nangia &Co.
All the information gathered is mapped toaperson´s Permanent Account Number (PAN). If you boughtaproperty, the information is linked to your PAN.
So are details of high spends and investment.
The data is collated, mined and analytics is used to track possible evasion.
It can be as simple as finding the total depositsaperson has made in several bank accounts to estimating the income mismatch by analysing tax returns, deposits, investments and spends.
Sophisticated technology:
Last year, the finance ministry launched Project Insight.
The implementation has started and will be completed by 2018.
It isatechnology platform that uses information to catch evaders, promote voluntary compliance and deter noncompliance.
Explains Chetan Chandak, head, tax research, H&RBlock India: The project has two modules -Income Tax Transaction Analysis Centre (INTRAC) and Compliance Management Central Processing Centre (CMCPC).
INTRAC uses technologies such as data integration, data processing, data quality monitoring, data analytics.
They show discrepancies in income.
If you purchasedaproperty worth Rs.1 crore but have showed income of Rs.5 lakh in your returns, an alert is generated for further investigations.
INTRAC will also mine the web and social media to pick information aboutaperson. If you post aboutaluxury trip and don´t file income tax returns, expectaletter from authorities seeking details of your income.
Experts say that it won´t be surprising if the tax department has created income models for individuals and businesses, like credit bureaus do. Ifaperson does not haveacredit history, the credit bureaus look at similar profiles of borrowers and predict the incomeanew borrower could have.
Then, they match the declared income with their prediction to check deviations, helping banks to assess the borrower better.
CMCPC handles preliminary verification, generates bulk letters or notices and followup on these.
In Operation Clean Money, the notices are sent by the CMCPC automatically, without human intervention.
The replies an assessee will provide for the notices, too, will get fed in the system automatically and analysed, based on which further investigations will happen.
Automation of notices means taxpayers don´t need to go to an assessing officer to provide relevant evidence.
It has also reduced the workload of tax officers, who are now focusing on areas where revenue leakages are higher, according to experts.
The finance ministry has maintained secrecy around Project Insight.
It´s done to avoid leakage on its functioning.
When the ministry floated tenders for the programme, all information technology companies bidding for it were made to signanondisclosure agreement.
Demonetisation has openedacan of worms: Withasubstantial portion of the ~15.4 lakh crore of cancelled ~500 and ~1,000 notes coming back into the system, the tax department suspects that evaders legalised their money using mules and proxies.
Many business owners have used backdated bills to justify the cash.
But, evaders weren´t only depositing cash by using various methods; they were also providing data to the authorities.
As the money came into banking channels, it can be tracked easily.
The details are now being used to catch such evaders and experts feel it´s tough to escape the department.
During demonetisation, deposits between Rs.2 lakh and Rs.80 lakh were made in about 10.9 million accounts, with an average deposit size of Rs.5.03 lakh.
Deposits of more than Rs.80 lakh were made in 148,000 accounts, with average deposit size of Rs.3.31 crore.
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