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

WORD WITH RIVALS ON FBT CAN AVERT I-T KNOCK

YOUR neighbour's tax payment could well become your burden. Companies can't just relax having paid their own fringe benefit tax (FBT); they must also take a peek at what their peers are paying. If your FBT payout is significantly lower than what your peers have paid, be prepared for the taxman's knock at the door.

Surprised at the wide variation in FBT payments made by India Inc last fiscal, income-tax department has decided to take a close look at tax filings of top 100 assessees in every zone this year. A concept note prepared by the department says:

“There has been wide variations in FBT payments by members of similar categories of assessees.” It says, “For example, while SBI has paid Rs 457 crore, Citibank has paid Rs 11 crore and ICICI Bank Rs 27 crore.” In the same period, Union Bank of India has paid Rs 32.4 crore, the note says.

The strategy involves comparing FBT figures of companies in similar categories. The plan has been put into operation from this month, as the first instalment of advance FBT for this fiscal was due by July 15.

The tax was introduced to bring into the net those employee perquisites that companies dressed up as reimbursement of expenses and were being taxed neither as perks nor as salary income in the hands of employees.

If there are wide variations in tax paid, chief commissioners have been asked to personally monitor advance FBT payments. They will use quarterly financial results of each company from the CMIE data base, to match whether advance FBT paid is “commensurate with expenses” as specified in the I-T Act.

 “In cases where wide gap is noticed between tax payable and tax paid for first quarter, chief commissioner should take necessary steps to ensure proper compliance of provisions by assessees,” it says.

The department will also issue a combined return form for FBT and incometax soon. For employers not liable to pay FBT, a separate return form will also be notified shortly. The stakes are pretty high for the I-T department to make a success of FBT. The department has earned Rs 4,780 crore in 2005-06 from the tax and expects to earn almost Rs 6,500 crore from it this fiscal.

For any fiscal, FBT has to be paid on or before 15th of the month following a quarter. For the last quarter, the presumptive tax, however, has to be paid by March 15.

BEWARE if you hold more than one Permanent Account Number. The income-tax authorities are all set to weed out the menace of duplicate PANs, so if you are one of those holding more than one number, then get it deleted on a priority basis.

With the finance minister setting December 31 as the deadline for doing away with duplicate PANs, the incometax department has armed itself with the data on the number of individuals who hold duplicate cards and will go full throttle to prune that list. This would also clear up some of the mess in the primary segment of the stock markets. In the course of investigations into the demat scam, Sebi found that several individuals who had cornered shares, had quoted duplicate PANs in their applications. As per data available with the tax department, 13.10 lakh individuals have been allotted more than one PAN.

Since the PANs are the vital clues being used by the department to trace big expenditure trails, if an individual has a more than one number, it is almost impossible for the department to match if the same person has made more than one big expense.

This makes the list of big spenders being thrown up by the Annual Information Returns trail, difficult to follow up. The AIRs have brought to light a total of 18,70,410 transactions involving spending of an amount of Rs 13,99,866 crore. Many of these transactions do not carry PANs, or have been carried out by same individuals mentioning different PANs.

So, far about 4.5 crore PANs have been issued. The Department receives 5 lakh applications every month for allotment of PAN. Tax department sources told that identification and deletion of duplicate PANs would be carried out through a combination of manual and computer based processes. The finance ministry would also advise the holders of duplicate PAN cards through a media campaign.

They said PAN allotments were based on three information heads- an individual's name, his father's name and the date of birth. These three would now be matched. It would be very rare that information given under all the three heads is same in any two individuals case.

In those cases, where there is difficulty in resolving the problem, it could be matched with the data revealed by the AIR and then, the individual would be advised to come clean on their own before any action or penalty is imposed. .