The taxman is stepping up surveillance on hospital, hotel, and high-end shopping bills as the Central Board of Direct Taxes (CBDT) intensifies its efforts to monitor cash transactions across various business sectors. From luxury hotels to IVF clinics, the CBDT has flagged a pattern of widespread cash dealings that often bypass mandatory reporting norms, prompting the Income Tax Department to take action. According to the CBDT’s recently issued Central Action Plan (CAP) for 2024-25, financial institutions are required to report cash transactions exceeding Rs 2 lakh through a Statement of Financial Transaction (SFT).
However, the board has identified significant gaps in compliance, with many businesses circumventing these regulations. The board emphasized the need to verify high-value consumption expenditures and cross-check them against taxpayers' financial information, aiming to curb these evasive practices. The sectors under scrutiny include hotels, banquet halls, luxury retailers, hospitals, and medical seats reserved for NRIs.
The CBDT has directed the tax department to identify these sources and initiate a non-intrusive verification process to gather the necessary data. The extent of cash in the economy is evident from the 1,100 searches conducted by the tax department in the fiscal year 2023-24, resulting in asset seizures worth approximately Rs 2,500 crore, with Rs 1,700 crore in cash. These operations underscore the ongoing challenge of tax evasion in the country.
Furthermore, the CBDT highlighted the role of data mining and analytics in identifying potential taxpayers, urging the tax department to leverage these tools to widen the taxpayer base. The department has been tasked with increasing the number of tax return filers by 10% in the current fiscal year, a move aimed at bringing more individuals into the tax net. The Board also raised concerns about the steep rise in arrear demands, which have surged from Rs 24.
5 lakh crore in April 2023 to Rs 43 lakh crore in April 2024. To address this, the CBDT has mandated the formation of special teams, led by Principal Commissioners of Income Tax, in each region by the end of September. These teams will focus on recovering tax arrears from the top 5,000 cases, which account for a significant portion of the outstanding demand.
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