CBDT notified Central Action Plan for FY25; asked IT Dept to expand Tax Base and Recover Arrears

The Central Board of Direct Taxes (CBDT) has announced its Central Action Plan (CAP) for the financial year 2024-25, which outlines a road map for the Income Tax Department.

CBDT asked the Income Tax Department to increase the number of tax filers by approximately 10% during the financial year ending March 31, 2025. CAP has yet to be made public and reportedly sets a target for the taxation authority to recover 60% of all pending tax arrears.

The action plan intends to promptly settle high-priority tax demand cases, broaden the tax base, and identify cash transactions worth more than Rs.2 lakh in high-risk sectors including hotels and luxury stores, according to the report.

The board has identified the top 5,000 tax arrears, accounting for approximately 60% of the total Rs.43 lakh crore outstanding tax demand, it added.

Central Action Plan Recommendations

• To resolve these high-priority situations, the Plan suggests organizing a dedicated team in each Principal Chief Commissioner of the Income Tax Zone, chaired by the Pr. CCIT. They plan to conduct a “thorough analysis” of the identified cases.
• The list of cases will be available by August 15, with the analysis scheduled to be completed by September 30.
• To expand the tax base, the Plan aims to promote voluntary compliance. It recommends identifying high-risk industries (e.g., hotels, luxury stores, and medical institutions) that “frequently circumvent reporting requirements”. The aim is to track cash transactions above Rs.2 lakh in these sectors.
• The CBDT has mandated the deployment of a verification method to audit high-value consumption expenditures and ensure correct reporting.
• The Plan also emphasizes the importance of strict compliance with Section 139A of the IT Act, which necessitates the use of PAN for specific transactions. However, the current lack of a method to enforce compliance has resulted in widespread circumvention.
• To solve this issue, it requires the Directorate of Systems and the Directorate of Intelligence and Criminal Investigation (I&CI) to identify authorities that do not validate PANs during transactions.
• The CBDT has set a September 30, 2024 deadline to identify such authorities. Its goal is to attain 100% PAN validation by March 31, 2025.

About Central Action Plan (CAP) for FY2024-25

CAP FY25 is divided into 19 chapters, each addressing a critical issue such as budget target allocation, arrears reduction, litigation management, service delivery standards, and grievance redressal. It also aims to improve impersonal assessments, jurisdictional and central levies in order to streamline tax administration and improve taxpayer experiences.

To guarantee that scrutiny assessments are completed on time, the CAP requires that all evaluations be completed at least one month before the deadline. Thus, during the current evaluation cycle, which concludes on March 31, 2025, the CBDT aims to complete 70% of cases by December 31, 2024, and 100% by February 28, 2025.

Furthermore, the CAP underlines the significance of checking high-risk remittance data in order to reduce tax evasion and ensure compliance.

The CBDT has set a high aim for this financial year: to increase the number of new tax filers by 10% of the filer base by the end of FY 2023-24. Although significantly lower than the previous financial year’s 11.9% rise, this aim indicates the government’s commitment to increasing the taxpayer base and improving tax compliance.