How can income tax department of India knows your money even in multiple bank accounts?
The income tax department of India has various tools and mechanisms to track the income and assets of taxpayers, even if they have multiple bank accounts. Some of the ways in which the income tax department can identify the money in your bank accounts are:
1. PAN (Permanent Account Number) – Every taxpayer in India is assigned a unique PAN by the income tax department. Banks are required to report all transactions made by individuals with their PAN to the income tax department. This helps the department to keep track of the income and expenditure of individuals across multiple bank accounts.
2. Form 26AS – Form 26AS is an annual tax statement that shows the tax credits and deductions of an individual as per the records of the income tax department. It includes details of TDS (Tax Deducted at Source) deducted by the banks and other deductors. The income tax department can use this information to identify the bank accounts held by individuals.
3. Data Analytics – The income tax department uses data analytics to analyze the financial transactions of taxpayers. They have access to various databases such as the PAN database, Aadhaar database, property registrations, etc. to identify any discrepancies in the income and expenditure of individuals. This can help them identify any undisclosed bank accounts held by taxpayers.
4. Information from Banks – Banks are required to report all high-value transactions (above a certain threshold) to the income tax department. This includes deposits, withdrawals, and other transactions made by individuals. Banks are also required to report any suspicious transactions to the Financial Intelligence Unit (FIU). This information can be used by the income tax department to identify any undisclosed bank accounts held by individuals.
In summary, the income tax department of India has various tools and mechanisms at its disposal to track the income and assets of taxpayers, including the money in their bank accounts. Therefore, it is important for taxpayers to disclose all their income and assets in their tax returns to avoid any penalties or legal action by the income tax department.
How can income tax department of India monitor ones income?
The Income Tax Department of India can monitor an individual’s income through various means. Here are some of the common methods used by the Income Tax Department to monitor an individual’s income:
1. Tax Return Filing: One of the primary methods through which the Income Tax Department monitors an individual’s income is through the filing of tax returns. The individual is required to file an income tax return each year and declare their income, expenses, and taxes paid during the financial year.
2. Tax Deducted at Source (TDS): TDS is a method of collecting tax at the source of income. The Income Tax Department monitors TDS deducted by employers, banks, and other entities, and matches it with the income declared by the individual in their tax returns.
3. Annual Information Return (AIR): AIR is a statement filed by various entities, such as banks, mutual funds, and companies, to report high-value transactions conducted by individuals. The Income Tax Department matches this information with the income declared by the individual in their tax returns.
4. Statement of Financial Transactions (SFT): SFT is a statement filed by entities that carry out high-value transactions, such as purchase or sale of property, to report such transactions to the Income Tax Department. This information is matched with the income declared by the individual in their tax returns.
5. Data Mining and Analytics: The Income Tax Department also uses data mining and analytics to identify discrepancies or inconsistencies in the income declared by an individual. This includes analyzing social media and other publicly available information to cross-check the information declared in tax returns.
6. Search and Seizure Operations: The Income Tax Department can also conduct search and seizure operations to unearth undisclosed income or assets. In such cases, the Income Tax Department can seize documents and electronic devices, such as laptops and mobile phones, to examine them for evidence of undisclosed income.
Overall, the Income Tax Department of India uses a combination of these methods to monitor an individual’s income and ensure compliance with tax laws.
What is the taxability if a individual who was resident for 5 years and running a proprietorship business and now becomes non resident but the the business is still active?
If an individual who was a resident of India for the past 5 years and running a proprietorship business becomes a non-resident, the taxability of the business income earned by the individual in India would depend on the residential status of the individual for the relevant financial year.
Under the Indian Income Tax Act, the tax liability of an individual is determined based on their residential status in India for the financial year. An individual is considered a resident of India if they satisfy any one of the following conditions:
1. They have been in India for 182 days or more during the financial year; or
2. They have been in India for 60 days or more during the financial year and have been in India for 365 days or more during the 4 years immediately preceding the financial year.
If an individual satisfies any of the above conditions, they would be considered a resident for tax purposes in India.
On the other hand, if the individual does not satisfy any of the above conditions, they would be considered a non-resident for tax purposes in India.
In the case of a non-resident individual, only the income earned or received in India would be taxable in India. If the business operated by the individual in India generates any income, such income would be taxable in India.
However, if the individual has any Double Taxation Avoidance Agreement (DTAA) between India and the country of residence, they may be able to claim relief from double taxation in the country of residence for the taxes paid in India. It is advisable to consult a tax professional to understand the tax implications and compliance requirements in such a scenario.
Will transfer pricing audit applicable in case a individual becomes non resident but his proprietorship business is still active in India having turnover of Rs. 20 cr.?
Yes, transfer pricing audit may be applicable in case a non-resident individual is carrying on a proprietorship business in India with a turnover of Rs. 20 crore or more.
Transfer pricing refers to the pricing of goods or services transferred between related parties, such as a non-resident individual and their proprietorship business in India. The Indian Income Tax Act requires that transactions between related parties should be at arm’s length, i.e., the prices or charges should be similar to those that would have been charged between unrelated parties in similar circumstances.
In case of a non-resident individual and their proprietorship business in India, if the transactions between them are not at arm’s length, the income of the business may be artificially reduced, resulting in lower taxes being paid in India. To prevent this, the Indian Income Tax Act requires that transfer pricing provisions should be followed while computing the taxable income of the business.
As per the Indian Income Tax Act, if the aggregate value of international transactions of an entity exceeds INR 15 crores in a financial year, the entity is required to maintain documentation and furnish a transfer pricing report in Form 3CEB. This report needs to be filed by the due date of filing the income tax return.
Therefore, if a non-resident individual is carrying on a proprietorship business in India with a turnover of Rs. 20 crore or more, and if the business has transactions with related parties, such as the non-resident individual, then transfer pricing provisions would be applicable. The business would be required to maintain documentation and furnish a transfer pricing report in Form 3CEB, as per the income tax laws in India. It is advisable to consult a tax professional or Tax consultant to understand the compliance requirements and implications of transfer pricing in such a scenario.
