Current income vs accumulated wealth

Faceless tax regime requires to prove that any individuals investments and spending were from accounted sources. The much- vaunted Al-driven Data. Analytics Package (DAP) makes a simplistic assumption that spending or investment for a year can happen only from that year’s income.

The DAP does not consider past I-T returns to match a taxpayer’s resources with their expenditures or investments. The term used is always “disproportionate to known sources of income” and never “disproportionate to known net worth”.

The belief that water can be drawn only from the rainfall for the year, ignoring the dam upstream. The system wrongly assumes that funds are drawn only from current income and ignores accumulated wealth.

However, being treated as a tax evader shakes honest taxpayers’ trust, even if they are cleared eventually. The actual evaders often escape unnoticed, while millions of man-days are wasted chasing the innocent.

Truth be told, the use of technology was meant to simplify matters for taxpayers. Certain aspects like refunds have indeed been hastened. But the DAP is not yet effective at identifying true tax evaders.

The safest place for tax evaders to hide is among a crowd of honest taxpayers. DAP must find the needle (tax evader) in a large haystack. But it is limited by the attitudes of the people who provided the specifications it. It is for currently a blunt tool that shortlists lakhs of honest taxpayers in the same net as the few evaders.

The effort required to isolate the tax evaders from these lakhs of honest taxpayers is immense.

It’s about time DAP is designed without the limitations of past attitudes. It can then provide insights that will help find tax evaders and avoid the bad press it gets when it targets honest taxpayers.