INDIA BUSINESS WORLD - JULY 2006
THE MONTH THAT WAS...

TAX HOUNDS ON SHOPAHOLIC CREDIT CARD HOLDERS' TRAIL

SPEND in haste, repent at leisure, especially if you thought the tax hounds wound sniff out the plastic trail. The Central Board of Direct Taxes (CBDT) has asked banks to provide permanent account numbers (PAN) of credit card holders who have run up bills of over Rs 2 lakh but not given their PAN.

The decision follows an analysis of annual information returns (AIR), which showed that the highest number of cases where PAN was not being quoted related to credit card transactions.

Several banks issue a range of credit cards, besides debit and prepaid cards. This client base is growing, as are card spends. The tax department now wants to keep track to ascertain whether high levels of expenditure matches income reported by card holders. The number of such card holders is reckoned to be 20 million.

“CBDT has told banks to provide PAN numbers of credit card holders as many of the banks are also credit card issuers,” said a top government official.

AIRs are being filed by third parties — such as banks, credit card companies and registrar of immovable property — listing out high value transactions of clients. Credit card companies provide a list of customers who run up yearly aggregate bills of over Rs 2 lakh. Similarly, banks are furnishing a list of customers who have cash deposits of over Rs 10 lakh in savings account.

NSDL, which hosts the Tax Information Network (TIN), digitises this data. A PAN-based individual ledger account is being created based on the information collected through AIR. The investments or expenses are matched with individual's tax return to see if he has short-changed the exchequer. The information collated through AIR is being made available online to the assessing officer.

Seven authorities are now filing these returns. The first set of AIR was filed last fiscal on high-value transactions during 2004-05. There were 18 lakh transactions valued at over Rs 13 lakh crore. However, PAN was not quoted in nearly 60% of transactions. The department has already sent notices to those who have not quoted PAN numbers..