Tax evaders' troubles just got bigger. Indian and foreign banks operating in the country have agreed to give income-tax authorities access to their data, a move that seeks to check accumulation of black money.
"IBA (the Indian Banks' Association) has written to the Central Board of Direct Taxes saying it is ready to give access to banks' data base," a finance ministry official told ET. IBA represents more than 160 Indian and foreign banks operating in the country.
Banking sector experts said foreign lenders would take the maximum heat of the IBA move as tax officials often suspect them of helping Indians stash away black money in their overseas branches.
Modalities for accessing the data will be worked out soon, the official added.
At present, banks disclose transaction and account details only in response to specific queries from the tax authorities. Banks are legally bound to report all suspicious transactions, or dealings above 10 lakh, to the income tax department's Financial Intelligence Unit under the Prevention of Money Laundering Act.
But tax authorities have been seeking a more dynamic flow of information from the banks to effectively track black money.
"Data on bank accounts and transactions can help tax authorities corroborate intelligence received from different sources," an income tax official said.
It is widely believed that a lot of black money is actually parked in India's banks and lax implementation of know-your-client, or KYC, norms by lenders is abetting the crime.
A number of cases have been detected in the recent past where customers opened multiple accounts with banks on the basis of just one permanent account number or PAN. In one case detected in eastern UP, 600 bank accounts were opened using 10 PANs, said the income tax official.
Banks are obliged to inform the income tax department if they detect such cases. Failure to do so could attract prosecution for abetting tax evasion. "Banks have been found flouting not just KYC norms, but they have also been lax in filing suspicious transaction reports," the official said.
The income tax department recently overhauled its intelligence-gathering wing, the Central Information Branch, giving it powers to summon suspected tax evaders. The branch has the mandate to trace black money parked abroad as well as track excessive spending.
This intelligence wing, which has 17 directorates all over the country, has put in place smart software that already has extensive information on taxpayers mapped to their respective PAN cards.
Access to bank data will give tax authorities a 360 degree view of the taxpayer.
Faced with a possible revenue shortfall this year, the tax department has stepped up action on intelligence received through various sources and is carrying out intensive surveys and searches all over the country.
Show cause notices have also been issued to individuals who hold accounts in foreign banks.
India has begun receiving information from other countries on financial transactions of Indians abroad after it signed tax information exchange agreements and revised Double Taxation Avoidance agreements with several countries.
Switzerland, a favourite destination for tax evaders, will also offer information on bank accounts held by Indians there from December.
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