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Home > Income Tax > Help Center > Tax Transparency Reforms 2020Last Updated: Dec 23rd 2023

Tax Transparency Reforms 2020: Decoding for an Indian Taxpayer ?

Honorable Indian Prime Minister Mr. Narendra Modi announced a unique set of Tax transparency reforms under the tagline of 'Honoring the Honest', document covering what it means to a common taxpayer related to Faceless assessment, record of all high value transactions and their limits that one need to aware, Specified Financial Transactions (SFT), Taxpayers Charter, and Other initiatives

Updates included
  1. Aug 13th 2020 : Covering PM Session on "Transparent Taxation - Honoring the Honest"
Tax Transparency Reforms 2020: Decoding for an Indian Taxpayer ?

This document covers

  1. Our assessment on what's coming ?
  2. Proposed measures for Widening the Tax Base
  3. Faceless Assessment
  4. Direct Tax Reforms

1. Our assessment on what's coming ?

The measures put forward are unprecedented to capture most data to raise the awareness and implement mandatory compliance measures and is particularly impacting the small business communities where the tax filing and compliance is mediocre at its best.

These provisions, if rightly implemented, bring greater transparency, compliance and bring more people in to the formal economy. Truly a commendable initiative to raise the honest taxpayer confidence in India.

What we all need is reduced bureaucracy, middlemen in the tax system, % businesses, and increasing the overall compliance to show case the true power of real Indian economy.

2. Proposed measures for Widening the Tax Base

~2 Crore new income tax filings processed during last two years, still the Indian Tax filings relative to its total population is way lower than many OECD nations. To widen the tax base and improve compliance & transparency, many measures proposed and being implemented with immediate effect.

NEW: High Value Transactions that are to be captured by the Income Tax Department and the minimum threshold for such.

#Transaction TypeMin. Amount (Rs.)
1Payment to Hotels20,000
2Payment of Property tax per annum 20,000
3Health Insurance premium20,000
4Life Insurance Premium50,000
5Payment of educational fee / donations1 Lakh
6Electricity Consumption per year1 Lakh
7Purchase of jewellery, white goods, painting, marble, etc1 Lakh
8Share transactions in DMAT Accounts / Bank Lockersany
9Domestic class Air travel / Foreign travelany
10Deposit / Credits in non-current Accounts25 Lakhs
11Deposit / Credits in Current Accounts50 Lakhs

OLD: Other popular High Value Transactions that are already being tracked under SFT are

#Transaction TypeMin. Amount (Rs.)
1Cash Deposit in Savings Account10 Lakhs
2Cash Deposit or Withdrawal from one or more Current Accounts50 Lakhs
3Term Deposits10 Lakhs
4Purchase or Sale of Immovable Property (House, Land, Apartment etc.)30 Lakhs
5Receipt of Cash for the Sale of Goods / Services2 Lakhs
6Cash Payment for Bank Demand Drafts / Challans 10 Lakhs
7Purchase of Shares / Mutual Funds / Bonds / Debentures 10 Lakhs
8Purchase of Foreign Currency10 Lakhs
9Credit Card Payment in Cash1 Lakh
10Credit Card payment in any mode other than cash10 Lakhs

Other Provisions
  1. Provision for the Deduction / Collection of tax at higher rates for no-filers of tax returns
  2. Provision for making Tax Returns Compulsory for taxpayers
    1. Whose bank transactions above Rs. 30 Lakh
    2. All professionals, businesses having turnover above Rs. 50 Lakh
    3. All whose payment of rent is above Rs. 40,000 per month

3. Faceless Assessment

To eliminate corruption, bring transparency, build trust among honest taxpayers both individuals and businesses alike, started the new Faceless, nameless, painless, and seamless income tax assessment, appeals.

  1. Officer selection is only through a computer system using data analytics & artificial intelligence (AI)
  2. Abolition of territorial jurisdiction to bring confidence in dealing with the IT Office / Systems in general.
  3. Completely automated random allocation of cases to officers
  4. Central issuance of notices with Document Identification Number (DIN)
  5. Removal of physical interface makes no visits to Income Tax offices
  6. Team-based assessments and Team-based reviews to reduce decision making power to just one officer.
  7. Draft assessment order in one city, review in another city & finalisation in a third city gives complete transparency in handling the cases.
Exceptions to above process
  1. Serious frauds, Major Tax Evasion, Sensitive, Search, Seizures related matters
  2. International tax
  3. Black Money Act & Benami Property

4. Direct Tax Reforms

To curb tax evasion and widening the tax base, government taken additional tax reforms part under this initiative

  1. Continue to encourage the digital transactions in all respects
  2. Expansion of the Scope of TDS / TCS for various transactions with certain threshold limits
  3. Form 26AS amended to provide information electronically to the taxpayers

  4. Enable Benami Law (of 2016) to confiscate the Benami properties & the prosecution of benamidars
  5. Revitalise the Black Money Act (of 2015) to curb black money stashed abroad
  6. Equalisation Levy of 2% extended under The Finance Act of 2020
  7. To bring efficiencies and reducing the cost handle the appeals, raised the monetary limit for filing of departmental appeal raised from

    1. Rs. 20 Lakh to 50 Lakh before ITAT
    2. Rs. 50 Lakh to l Crore before High Court
    3. Rs. 1 Crore to 2 Crore before the Supreme Court
  8. ITR form now contains prefilled details of certain incomes
  9. Hassle-free assessment procedure, exemptions from Angel-tax, constitution Of dedicated start-up cell

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Disclaimer: This article provides an overview and general guidance, not exhaustive for brevity. Please refer Income Tax Act, GST Act, Companies Act and other tax compliance acts, Rules, and Notifications for details.