Income Tax dept identifies millions of non-tax payers using software

The income tax department has been able to identify millions of non-tax-filers and collect Rs 26,425 cr of self-declared tax by using software to analyze third party financial and transaction data over the last six years, the finance ministry said.

The income tax department has been analyzing financial and transactional data since the year 2013 and has managed to generate 1.72 cr income tax filings after contacting people based on this data, finance minister Arun Jaitley said today. People are contacted via email, SMS, calls and letters.

While the analysis used largely government data in the initial years, it has been expanded to include data from private establishments, including banks, the minister added.

“The mechanism for collection and verification of financial information has been broadened to include data in respect of various types of high-value transactions from banks and financial institutions and high-value expenditure from commercial establishments,” he added.

Though he did not clarify it, the data is expected to include credit card and debit card transactions, money transfers, large cash deposits and purchase of high-value items such as gold, cars and property.

Every year, the system — known as Non-Filer Monitoring System — identifies tens of lakhs of people who are likely tax evaders and are not present in the database of those who file their taxes.

In the first year of 2013, the system identified 12.19 lakh potential ‘non-filers’, and has, since then, identified more and more potential tax evaders every year.

In 2014, for example, it flagged 22 lakh people. In the next year, the number doubled to 44 lakh, and further increased to 67.54 lakh in 2016 (see chart)

Interestingly, the demonetization exercise seems to have flushed out most of the non-filers in 2016 itself, as the number of people thrown up by the computer fell for the first time in 2017.

In 2017, only 35 lakh potential non-filers could be identified.

These numbers are significant, given that the total number of tax filers in India is only 2.82 cr (28.2 mln) as of 2017 filing season and was only 2.26 cr (22.6 mln) in 2016.

Despite this, the government’s target of increasing the number of tax filers by 1.25 cr in 2017 season (April 2017 to March 2018) is unlikely to see fulfillment.

As of December, the number of new tax filers who have been signed up since April 2017 is only 63.86 lakh, Jaitley said.