Compliance query of Income tax Department – all you need to know

Compliance query of Income tax Department, The income tax department of India has tightened its norms since 2013-14 and has started sending Compliance Queries to non-filers of income. They are using this information to prove under-reporting of income by tax payers. The income tax department is using non-filers monitoring system (NMS) to gather information about financial transactions and activities of the tax payers. Through NMS the income tax department in 2015, recognised 44.07 lakh non-filers with possible tax obligations. Previously income tax department with the help of NMS in the year 2013 and 2014 recognized 12.19 lakh and 22.09 lakh non-filers with possible tax liabilities respectively.

Compliance query of Income tax Department

According to the latest data with the implementation of NMS the income tax department were able to bring in Rs. 4,733 crore of self-assessed tax and 30.98 lakh returns from the identified section of non-filers of tax. The Income Tax Department has also set aside a devoted workforce for data centres, Centralized Processing Cell Compliance Management (CPC-CM) to recognize tax avoiders. The Central Board of Direct Taxes project will enable the I-T department to check for non- filers and non-compiling individuals using technical data.

What is Non-Filers Monitoring System and how it works?

NMS is a system adopted recently by income tax department of India through which it wishes to detect non-filing eligible tax payers. The income tax department along with Financial Intelligence Unit (FIU) through data analysis would find PAN cardholders who despite of high value transactions have not filed their income tax return. Letters are sent to non-filing PAN holders by Compliance Management Cell (CMC) communicating the info, seeking to inform about submission of income tax return. Income tax department has identified various filers and non-filers through TDS statements, centralised information branch (CIB) and Annual Information return (AIR) and is sending out emails, sms’s and letter to non-filing individuals. According to the income tax law anyone with income of more than Rs 2, 50,000 has to file income tax return. Return filing is obligatory in some cases.

Dealing with notice from Income Tax Department:

If an individual receive a letter from compliance management cell (CMC) regarding non-filing of income tax return it is better to consult a tax professional prior to submitting information online as wrong information might lead to further investigation. It is advised to calculate the tax liability and pay it before filing a tax return. If the individual does not respond within the asked limit the CPC-CM will send information to assessing officer who might take the case for scrutiny and the individual might end up paying tax with interest and penalty.

Conclusion:

The non-filing monitoring system is a great initiative by the income tax department. Along with the help of FIU and TDS statements, centralised information branch (CIB) and Annual Information return (AIR) the income tax department has started identifying the tax evaders and thus wishes them to file their tax return with integrity and on time. The process is bound to get better in the near future with the use of advance data analytics, thus it would be interesting to see if the income tax department can reduce the number of non-filers to minimum.

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