Rules tightened for non-filers of Income Tax Return

The Central Board of Direct Taxes (CBDT) tightens the rules dealing with monitoring of “non-filers” of Income Tax Returns and aims to follow uniform procedure to handle them to check tax evasion.

The existing procedure for monitoring the cases of “non-filers” of Income Tax Returns has been carefully examined by the Board. As per the opinion of the CBDT, presently the cases of non-filers are not being properly monitored by the Assessing Officers because of inconsistency in dealing with them.

The IRS aims to identify the non taxpayers of tax. The IRS will try to identify their occupation, bank or savings accounts, sources of income, address and their standard of living.

The “Tax Gap”:

The “Tax Gap” denotes the total amount of tax liabilities which are not paid on due time. The Tax Gap represents the unpaid income taxes. The “Tax Gap” includes under-reporting of income, underpayment of due taxes and non-filing of returns. About 80% of the “Tax Gap” is linked with under-reporting of returns, 10% deals with non-filing and the rest is linked with the non-payment of taxes.

New procedure introduced:

The CBDT has issued “standard operating procedure” for monitoring the “non-filers” of Income Tax Returns. The department has stated that it will to go on searching out the tax evaders. According to the new rules, the Assessing Officer should issue a letter to the assessee within 15 days of assigning the case in NMS, asking for information regarding the income tax return.

In cases where the assessee who is identified and has not filed any return within 30 days of the letter, the Assessing Officer should initiate proceedings as provided. The CBDT has marked nearly 12 lakh non-filers and has sent letters to them for filing returns duly and to pay due taxes. According to the latest data, the department has sent letters in about 2.5 lakh cases.

Who is a “non-filer”?

A “non-filer” is a taxpayer who fails to file his return before the due time. A “late filer” is someone who files the return within the next year after lapse of the due time. Many non-filers often become liable to penalties. Others are trapped into non-filing category due to past decisions.

Tax recovered after notice:

After issuance of letters to the non-filers, nearly 3.5 lakh returns have been received till date. Those non-filers have also paid self assessment tax which comes to more than Rs 550 crore and advance tax which comes to more than Rs 400 crore. The department has also declared that this will continue till it covers all non-filers.

Since a long time, the IRS has been trying to bring back about 7 to10 million non-filers, most of whom are self-employed individuals. To encourage them, the IRS did not recommend prosecuting them who later on voluntarily file their tax returns by the Judicial Department.