In addition, the government is also likely to incorporate in the upcoming fiscal´s budget a provision for compulsory PAN registration for consultancies, educational and health institutions and firms of doctors, lawyers and engineers, among others.
Once the system is implemented, accounts of all individual and institutional taxpayers will be opened and tax offices throughout the country linked with the main server at the Inland revenue Department (IRD). As each individual will have a separate PAN number, a tax office will be able to consolidate everyone´s income and establish the tax liability.
The new system will make service purchasers and providers mandatorily mention PAN in books of account and payment receipts. “This will help us cross-verify the tax compliance by firms and individuals,” said Shanta Bahadur Shrestha, IRD director general.
Also, professionals who are earning handsome incomes from multiple service contracts but are getting a clearance after paying just 15 percent tax at individual sources, would not be able to walk away free as they are doing now.
The tax office will consolidate all PAN holders´ incomes from multiple sources at the end of the fiscal year, and if their total income draws tax liability of 25 percent, revenue officials will knock at their doors.
Under the present law, income of over Rs 180,000 a year creates a tax liability of 25 percent.
IRD believes the accumulated annual income of even low-scale service providers crosses that limit. However, it has been failing to realize revenue due because of the absence of a proper registration and tracking system.
"The new system will plug that leak and it is estimated this will generate Rs 1.50 billion in additional revenue for the government," said Shrestha.
Shrestha told myrepublica.com that the program, however, will need clearance from other political parties that are expected to join the government soon.
The department has said the new system will give due recognition to all tax payers, and also help increase the number of registered taxpayers.
So far, the number of registered taxpayers in the country is a mere 327,000. IRD plans to raise the figure to one million in the next five years.
“We aim to increase the registrations by 200,000 in the next fiscal year alone. PAN registration of salaried staff, freelance professionals, service firms and also house rent taxpayers will help us realize this target,” said Shrestha.
milan@myrepublica.com
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