The action was taken after cases were detected where foreign remittances and expenditure were not in line with the income declared by individuals, as well as deficiencies in collection of tax at source (TCS), sources familiar with the matter told ET.
The board has directed its regional offices to start the checking and verification process of Form 15CC, which is the quarterly disclosure statement of outside funds to be submitted by authorised dealers to the Income Tax Department. Form 15CC The data has been collected and disaggregated since 2016, and will be available for analysis from this year.
The board will prepare a list of high-risk cases based on scrutiny of data after the 2020-21 financial year. It has directed field formations to develop a detailed standard operating procedure (SOP) for detecting high-risk cases and submit a list of such cases by September 30. The government has set a deadline of December 31 for sending preliminary notices to people with undeclared income.
risky money remittance
“A comprehensive review was recommended last year… it will (soon) be made available to regional formations for the first time,” a senior official told ET.
The official said the initiative would help the government identify cases where money was sent but taxpayers did not disclose it in their returns.
“This entire exercise will curb tax evasion and ensure that legitimate remittances are facilitated, while also preventing abuse of exemptions in reporting of foreign remittances.”,
An official has unearthed irregularities in foreign remittances, citing a case where a man with a declared annual income of Rs 5 lakh sent Rs 15 lakh abroad in the last three years, using multiple dealers to evade the mandatory tax collected at source (TCS) and evade the tax.
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The government levies 20% TCS on foreign remittances above Rs 7 lakh under the Liberalised Remittance Scheme (LRS), with some exceptions for medical and education expenses. Form 15CC allows remitters to certify that their remittance is not taxable, without needing to provide any further details. It applies to payments made by importers, companies to their subsidiaries, or loans given to non-residents.
However, officials have identified potential abuse of this exemption. “It is important to monitor payments where exemptions are claimed to prevent abuse of these exemptions,” said the official quoted above.
The CBDT has directed banks to report total foreign exchange expenditure as a separate category, apart from total credit card expenditure, even if they are not collecting TCS. This data is included in the annual income statement used for income tax assessment. The government has increased TCS on foreign remittances under LRS from 5% to 20%, effective from October 1, 2023.
The 2023 Budget initially brought international credit card payments under the LRS and imposed TCS on such transactions. However, this decision was later reversed due to widespread criticism.