Black money fight: Tax evaders beware, Income Tax Dept scanning your social media posts

Have you recently been on a foreign trip or organised a grand party? Also, posted those photographs on social media to get appreciation from your friends? However, you never file your income tax return or understate your income in the return? Better be careful. For, the Income Tax Department will soon start keeping tabs on social media posts to have a fair idea about people’s spending pattern, which will later be matched with their declared income. This is part of the I-T Department’s initiatives to monitor high-value transactions and find out any discrepancy between a taxpayer’s income and expenses.
Called Project Insight, the move is aimed at having an insight into taxpayers’ income and expenses so that no one could get away with either paying less in taxes or paying no taxes at all. The Union Finance Ministry plans to launch Project Insight in October 2017 that will monitor high-value transactions and detect tax evaders using technology. This move comes as an initiative to further curb circulation of black money post undertaking initiatives such as demonetization and ‘Operation Clean Money’.
“Income tax Transaction Interaction Analysis Centre (INTRAC) and Compliance Management Central Processing Centre (CMCPC) are the two modules of Project Insight. INTRAC uses technologies such as data processing, data quality monitoring, and data analytics which help in showing discrepancies in income. For example, if you purchased a property worth Rs 1 crore, but have showed income of Rs 5 lakh in your returns, an alert is generated for further investigations,” informs Chetan Chandak, Head of Tax Research, H&R Block India.
In addition to this, INTRAC will mine data from the web and social media to gain more clarity about the person. For instance, if you post about a luxury trip and don’t file income tax returns, expect a letter from the authorities seeking details of your income. “Similarly, without any human intervention CMCPC handles preliminary verification, generates bulk notices, follows up on the same and also automatically uploads the replies provided by assessees. This initiative will help in widening the tax base and promote voluntary compliance by individuals,” says Chandak.
Tax experts say that the government has stated that the information available post demonetisation will be used to evaluate cases of tax compliance / non-compliance in a non-intrusive manner. Initial steps taken by the government wherein tax payers have been asked to provide information / clarifications online, supports this view. Going forward, more specific information / scrutiny is likely to take place where information has not been provided by the taxpayer or does not match with the information available with tax authorities.
“Project Insight is a significant step in this direction wherein data analytics and data mining tools are to be used to track any tax non-compliance. As more and more databases get linked, a lot of information will be available with the tax authorities at the click of a button, and data analytic tools will immediately highlight any discrepancies,” says Vikas Vasal, Partner & National Leader-Tax, Grant Thornton India LLP.
What should taxpayers do?
It may be noted that the government has widened its data collection points in the last year with demonetisation and the linking of Aadhaar with PAN. “The data analytics would throw up any discrepancies between a taxpayer’s income and expenses, any investment and wealth accumulation over a period of time. Thus, taxpayers need to be more cautious and should ensure full disclosure and compliance in their tax return to avoid unnecessary disputes at a later date,” says Vasal.

This story was originally published by Sanjeev Sinha in Financial Express on September 10, 2017.

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