FM proposes to add STT to annual information returns

The tax department may reciprocate the generosity of corporate and personal income tax payers in this Budget.

But it is also proposing to add securities transaction tax, or STT, to the list of annual information returns so that tax payers are driven to greater honesty, reports CNBC-TV18.

This is the room that Louis Mountabatten occupied as commander of the allied forces in this region during the Second World War. Now it is presiding over another conquest, that of indirect taxes by income taxes as the most important contributor to the treasury.

Fear has driven honesty and the tax department proposes to add to the list of annual information reports, so that it is better able to estimate an assessees income by keeping a tab on their expenditure and investment.

P Chidambaram, in his previous stint as Finance Minister 10 years ago had decided that lower tax rates would result in higher collections, though the trend was actually started by VP Singh and carried forward by Manmohan Singh.

Chidambaram had slashed the peak rate to 30%, but tax collections had not responded then because the economy was in a downturn. This time, though the peak rate is 34% including surcharge and cesses, there has been a dramatic change. And the tax department could respond to the change, with a change of heart itself.

The tax department says that much of the tax collection has come from existing tax payers paying more, not from new assessess. Currently there are 35 million registered tax payers and the number could over time rise to 45 million.

Though 27.5 million assesses filed tax returns, many of them are what are called capital build up cases, people who pay nominal taxes, so that they can convert black money into white for a fee.