Tax Authorities in India Gain New Rights to Investigate Taxpayers

January 18, 2012 Taxation in India

1 RupeeNEW DELHI – Indian taxpayers making large purchases over the next two months could be visited by tax investigators trying to determine the origin of the money used for the transaction.

On January 18th the Finance Ministry of India released a new statement announcing that the Income Tax Department has received instruction from the country’s Central Board of Direct Tax to begin a new campaign against tax evasion. The new drive will see the Income Tax Department’s investigators scrutinize high value transactions carried out across the country, with the aim of catching out individuals whose incomes would not typically allow for such purchases.

The program will run from January 20th until March 20th, and will see investigators inspect all high value transactions completed in India by individual taxpayers who did not provide their tax numbers at the time of the sale. The statement indicated that the investigators will pay particularly close attention to purchases of property, shares, bonds, luxury vehicles. The assessments will also be carried out on taxpayers making large fixed term deposits with banks and other financial institutions. It is expected that the investigators will focus on purchases and transactions worth more than INR 1 million (approx USD 19 814).

According to the statement, initial investigations can trigger further detailed assessments of the individual’s tax affairs, in cases when breaches of tax regulations are detected. Investigators will also have the new right to visit the personal home or business premise of the individual being investigated.

As per regulations of the Central Board of Direct Tax of India, any taxpayers who, during the investigations, are found to have completed the purchase using illicit or undeclared funds could face penalties of up to 300 percent of the evaded tax liabilities.

Photo by Saad.Akhtar