The finance ministry has decided to curb defaults in tax deducted at source by introducing printed format with coded certificates in the next fiscal year.
Central Board for Direct Taxes officials maintain there is no other area of work, be it assessment or search and seizure, that can yield better revenue than stringent scrutiny of the TDS mechanism.
According to the CBDT, over 40 per cent of the total direct tax collection accrues through TDS, of which salaries contribute almost 50 per cent. Of the Rs 84,000 crore (Rs 840 billion) direct tax realisation expected this fiscal, officials estimate that the TDS collection will top Rs 35,000 crore (Rs 350 billion).
During a recent review meeting, Minister of State for Revenue Gingee Ramachandran was told by income tax officials that taxpayers submitted TDS certificates on plain paper. There was no particular printed certificate with any secret code that could plug evasion, he was informed.
CBDT officials admit that the absence of security coding results in a large number of bogus TDS declarations. The declarations do not adhere to any standard procedure and there is no mechanism to verify their authenticity. The department is particularly concerned about TDS certificates issued in favour of contractors.
Ramachandran directed the CBDT to study the issue and suggest measures that would ensure compliance. CBDT officials said the introduction of a printed format with a security device, like coded certificates, could result in checking evasion.
The finance ministry has for long been planning to introduce a mechanism for the scrutiny of TDS, the ambit of which has significantly increased in the last two years. Perquisites and windfall income now fall under TDS.
The CBDT officials said the department had worked towards streamlining the TDS wings across various ranges and had also computerised them in the past 18 months. It had studied the returns of the top 100 taxpayers last fiscal to match them with the returns of the deductees to detect short-deduction or non-deduction. This had helped the department to check evasion to a certain extent, the sources said.