Over 50% Indian firms non tax-compliant, says Tax Body Chief

Reuters: Chairman of India’s Central Board of Direct Taxes (CBDT), Sushil Chandra, early this week said that over 50% of companies in the country were non-tax compliant.

Chandra made the remarks while addressing a post-budget interactive session with members of Confederation of Indian Industry (CII) in New Delhi.

“Out of 1,500,000 companies which have been incorporated, only 36,500 companies are filing return over one crore ($ 148,000). Then something is required to be done. And here are the persons who can help us in this particular endeavour. So our purpose is that everybody should be compliant,” said Chandra.

Chandra warned such companies and individuals were likely to come under the tax net soon.

Under a tax amnesty scheme announced by Indian Finance Minister Arun Jaitley in December, tax dodgers have until March 2017 to come clean.

Those who fail to declare their untaxed income under the scheme will have to pay a minimum 77% and up to 100% in tax and fines.

“I will be happy if we can reach to that level where the persons should be tax compliant and Section 132 (relating to search), 133A (relating to survey) can be removed from the Income Tax Act. We want to see that particular day in our life if we can see that,” said Chandra.

He added, a 100% penalty will be charged for cash transactions above rupees 300,000 ($ 4,464).

“Equal amount of penalty will be imposed on them. If cash transactions above rupees 300,000 ($ 4,464) will be done and the person who takes it, will be imposed the penalty of the same amount, that is 100% of that amount. This is only to stop cash payment above 300,000 rupees,” Chandra told reporters.

In its budget 2017-18, the federal government announced a limit of INR 300,000 on cash transactions, starting April 01, in a bid to curb black money and boost digital payments.

The problem of the shadow, or “black” economy in India is pernicious. Transactions that take place outside formal channels amounts to around 20% of India’s annual $2 trillion gross domestic product, according to investment firm Ambit.

Shrinking it is a major objective for Indian Prime Minister Narendra Modi, who, in a crackdown on rampant corruption and counterfeit currency, abolished 500 and 1,000 rupee banknotes at midnight on November 8.