"Whenever we have carried out search operations, we have invariably found large sums of cash that have passed through the banking channel. But banks often refuse to disclose information. Once we impose a 0.1 per cent tax, we will get the entire list of those who have withdrawn over Rs 10,000 in a day," said a revenue department official. | |
| With more information at its disposal, the tax department hopes to track black money. "It is a small cost for tax-payers to help them reduce their tax burden in the future," an official said. |
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| Officials also said the government would be able to tax embedded perquisites through the fringe benefit tax. At present, corporates are parking large sums in superannuation funds, which are exempt from tax. |
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| "Each employer in the private sector is allowed to create a fund and so far the contribution to the fund are entitled to tax benefits. However, a close analysis of companies has shown that in many cases employers are contributing a very significant portion of employees' salary towards this fund. More so, since salaries in the private sector have risen sharply in recent years," said Parthasarthy Shome, adviser to the finance minister. |
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| "While a part of the contribution is superannuation benefit, there is a portion that is more than that. It is this portion we are seeking to bring in the tax net," Shome said. |
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| He added that the inclusion of 100 per cent contribution to the approved superannuation funds did not include the Employees Provident Fund and the Public Provident Fund as the superannuation fund was created under the Income-Tax Act. |
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| Shome said the limits under the fringe benefit tax had been modelled on the lines of a similar tax in Australia. "The idea is to have a comprehensive fringe benefits tax base and impose a proportionate tax on it," he said, adding that the tax on fringe benefits was equal to the corporate tax rate (inclusive of surcharge and education cess). |
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| Officials said corporates often disguised private trips as official work. For instance, a conference will be held for two days but executives will spend four days in a particular location and companies will often disguise it as a cost of holding the seminar. |
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| They said the corporate sector would shift transactions that were not in the nature of voucher payments once the fringe benefit tax came into existence. |
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| They added that partnership firms were already paying tax on the use of phones and entertainment. |
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| "We have given a long list of items to be covered under the fringe benefits tax to ensure that companies do not shift entries from one category to another," an official added. |
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| Officials also said the rules for the fringe benefits tax would clearly specify what constituted normal business expense and what was a perquisite. |
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