— PHOTO: KAMAL NARANG

CRACKING DOWN: Finance Minister P. Chidambaram (centre), with Chairman, Central Board of Direct Taxes (CBDT), M. H. Kherawala (right), and Minister of State of Finance, S. S. Palanimanickam, at the annual conference of Chief Commissioners and Directors General of Income Tax in New Delhi on Tuesday.

NEW DELHI: Union Finance Minister P. Chidambaram on Tuesday advised people engaged in high-value transactions to pay up their tax dues and file returns before July 31, failing which the income-tax authorities would hound them out "sooner or later."

Assisted by banks and other financial institutions by way of annual information returns (AIRs), the Income-tax Department, Mr. Chidambaram said, would "pursue every single person whose names are thrown up by AIR...sooner or later, they will be reached.''

Speaking to newspersons after inaugurating the two-day annual conference of Chief Commissioners and Directors General of Income-tax here, Mr. Chidambaram said: "My advice to all those who have made large transactions like buying property over Rs. 30 lakh, buying mutual funds over Rs. 2 lakh in a year or credit card payment exceeding Rs. 2 lakh yearly, please file tax returns before the last date of July 31.''

Explaining why the taxmen will get at them, Mr. Chidambaram said: "These are not poor, lower middle-class or salaried people. These are high net worth people. If not today, in three, six or nine months, [the] income-tax people will reach the parties.'' While there will be no harassment if they file returns but, if not, "let me say the Income-tax Department will find ways to reach them,'' he warned.

Mr. Chidambaram noted that the AIRs had reported a total of 17.53 lakh high-value transactions by 6.6 lakh separate parties. Out of these, only 1.85 lakh parties had quoted their PAN (permanent account number). The remaining 4.75 lakh parties were without PAN, he said. Even assuming that there could be some overlaps, Mr. Chidambaram's advice to these parties was to file their returns before the July 31 deadline.

To track down these high-value transaction parties, the IT Department, Mr. Chidambaram said, would adopt a four-pronged strategy to identify the person first, then check if the person had a PAN, then find out if the returns had been filed and if so, whether the transactions were reflected in the returns. "We have no interest in harassing or squeezing anyone. We simply want people to become more tax compliant,'' he said.

Admitting that tax compliance was greater now compared to six years ago, Mr Chidambaram said: "But I think there are a lot of rich people still not paying the taxes that they should be paying. The salaried class are obviously paying. But I think a large number of individuals who ought to be paying the correct taxes, are not complying.''

For easy filing of returns, Mr. Chidambaram said, the Government had set up 321 `Help Centres' in 282 cities and towns. Operational from June 15, these centres do not charge any fee and will be in place till August 15 and then from March 1 to 31 next year.

DTAA with Mauritius

Mr. Chidambaram said the Government was trying to renegotiate the Double Taxation Avoidance Agreement (DTAA) with Mauritius so as to check its misuse by shell companies, while noting that there could not be any "unilateral decision'' on this count in view of the diplomatic and political sensitivities.

"It is a sensitive matter for Mauritius. We are trying to negotiate... I can't take unilateral decision in this regard. There are political and diplomatic sensitivities. [The] Ministry of External Affairs is helping us,'' Mr. Chidambaram said on the sidelines of the conference.

The Finance Minister's remarks came in the wake of reports saying that India's suggestion was that only companies listed on a recognised stock exchange could be eligible for capital gains tax exemption under the DTAA.

During the interaction, Mr. Chidambaram also announced that the new Income-tax Bill, which is to replace the archaic and voluminous tax legislation, would be ready by the end of this month.

"We have given extended time to draft the new Bill till July 15 and surely, it will be drafted by this month end,'' he said.

The simplified IT Bill was aimed at making tax laws more user-friendly so as to reduce the scope for litigation.

Duplicate PAN cards

Lakhs of duplicate PAN (permanent account number) cards now in circulation would be scrapped by the end of 2006 and efforts were on to issue a "new fool-proof card,'' Mr. Chidambaram said.

At present, about 23 lakh duplicate PAN cards were in circulation as a result of the indiscriminate issue of these cards, to start with.

Although not all such duplicate cards were bogus, a campaign would be launched under which people would be asked to surrender these PAN cards, he said.

"[The] process is well under way. By December 31, all duplicate cards will be removed,'' Mr. Chidambaram said. At present, new assesses were voluntarily taking PAN cards. In fact, it was now compulsory for any new assessee to take a PAN card, he said.

As for computerisation of the Tax Department, Mr. Chidambaram pointed out that there were "too many difficulties'' and the department had appointed an outside expert to advise and monitor the progress.

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