TDS on Foreign Payments - CAG Recommendations
THE CAG has recommended:
++ A periodic reconciliation of aggregate data maintained by various government agencies that together should provide an oversight on forex transactions. Ministry of Finance could co-ordinate to institute a mechanism for such reconciliation;
++ That a significant step towards transparency will be the submission of tax gap analysis to the Parliament. This will also provide an estimate on revenue leakages in forex remittances;
++ That the ITD conduct a macro-analysis of remittances. This analysis can form the basis for a risk-based tracking of high risk transactions by ITD in co-ordination with the banking sector. The data can also be used to further fine tune selection of tax returns for scrutiny for eg : remitters with high volume of forex transactions with OFCs can be selected;
++ That a flat and lower tax rate applied to all payments regardless of their purpose or destination will be a more viable alternative to administer for the ITD as well as the banking sector;
++ An automated solution that sifts out error reports from e-filed undertakings. This would require that the purpose codes of RBI are adopted by the ITD and integrated into the automation. This will also facilitate reconciliation of data with RBI;
++ That the e-TDS returns must also provide data on all remittances, even those with null value for TDS and must also capture the purpose codes;
++ That adequate safeguards may be built into the system to protect revenue on account of thin capitalization. ITD needs to strengthen monitoring of non-filers among liaison offices;
++ That sectorial studies may be conducted by ITD to identify the avenues of revenue leakage as well as flag ambiguities in emerging areas.