Taxmen now targeting fixed deposits earning interest of Rs 5 lakh or more

The income-tax department is reportedly focusing on individuals who earn high interest from fixed deposits but do not include this income earned in taxable income while filing returns.

According to a report in the Economic Times, I-T is chasing those with interest income of Rs 5 lakh or more but do not mention it in tax returns. Information is being obtained from banks as they deduct tax at source (TDS) on FDs. In some cases, despite falling in the 30% bracket, individuals are paying only 10% tax

"The move is part of attempts being made by the government to widen the tax base and also includes focus on professionals, many of whom earn their fee in cash and do not disclose the exact income despite maintaining a lavish lifestyle," the ET report said.

Earlier this year, the I-T department identified 556,000 people for scrutiny over “huge inconsistencies” in the cash deposits made during the demonetisation period. This is the new addition to the tax data that had identified 60,000 people for investigation into claims of excessive cash sales under the department’s Operation Clean Money phase-II.

The cash flow was not limited to these people’s bank accounts but was also seen in various investments.

Sources said the new data had been gathered from specified financial transactions (SFD) like banks, mutual funds, insurance companies. Tax authorities have started issuing notices to the people concerned, seeking explanation on being inconsistent in cash deposits.

In the second phase of exercise, more than 6,000 transactions of high-value property purchase and 6,600 cases of outward remittances were also identified, which were subjected to detailed investigations. 

The threshold under the first phase of the operation, which began on January 31 and ended on February 15, was kept at deposits of Rs 5 lakh and above, while the second phase was launched in April and targets deposits over Rs 10 lakh. 

The first phase of Operation Clean Money involved e-verification of cash deposits made in the banks. The entire phase was conducted online, and 1,792,000 people were identified whose deposits were not matched with their tax profile.