It's Raid Season

The Long Arm Of The Taxman Just Got Longer, And More Than 60,000 People Have Been Tagged For Audits And Investigations Post Demonetisation.

- Shweta Punj

Keshav Lal, a Kanpur-based additional commissioner of sales tax, probably did not expect the taxman to come knocking at his door. According to reports, income-tax (I-T) officials found Rs 10 crore in cash and 10 kg of gold during the raid. In a similar story, a general manager of the Uttar Pradesh Rajkiya Nirman Nigam in Dehradun was raided for “misusing his official position” and amassing untaxed wealth. In the past few months, the I-T department has carried out a series of raids like these, across the country. Perhaps for the first time in India’s economic history, there is a credible fear that the taxman could actually get you if you’re on the wrong side of the law—or even if they have ‘a reason to believe’ you are.

The department, once infamous for inefficiency and corruption, today finds itself at the centre of an ambitious government programme to rid the nation of black money. However, since arbitrary audits can lead to taxpayers getting intimidated—and give them an incentive to hide their wealth—the department has to find a way to hunt down actual evaders while making sure they do not wind up harassing honest taxpayers.

That said, there are reasons for a more proactive I-T department in India. Consider these points: India’s tax-to-GDP ratio, at 16.6 per cent, is lower than the emerging-market economy average of 21 per cent. Some 37 million Indians filed tax returns in 2015-2016. Of these, only 2.4 million declared an income of over Rs 10 lakh. Even so, an average of 2.5 million cars—including 35,000 luxury vehicles—are sold in India every year.