‘Follow the Money trail!'

Time of India

02-05-2025

Homeyar Jal Tavaria is a professional accountant with interest in the science of accounts and audit, observer and commentator on macro economic commercial, financial and economic events, occasional blogger'. LESS ... MORE
One of the most important financial advices given to a financial professional is – 'follow the money trail'.
In plain language, it means track who has finally benefitted from the event / service and / or has made payment for the same. Money never changes hands unless there is a benefit or advantage derived from the exchange.
One can apply the lesson of 'follow the money trail' to many events that are happening in India today:
International rankings and ratings — whatever we in India may do to improve on international rankings such as health index, hunger index, per capita income, democracy index, national health index, etc — the subtle message coming thru is that you are not good enough. There is a lot of distance still to be covered by the country. In many cases, there are some very surprising countries ranked higher than us. The issue that we in India have to focus on who is the organization making the rankings and who is funding the organization.
It is almost certain that the Report creation by NGOs / influential thinktanks is funded by Financiers, Investment Trusts, etc who have a clear anti India agenda. There are many such entities in the World -worried by India rising economic and political power who would want to sow seeds of unhappiness, dis-satisfaction, despair, to make the country feel small and not upto the status that it merits and deserves.
The next time the Indian media quotes the findings of these Bodies and quotes their Reports as gospel truth – they should find out who is funding such organizations and mention their names in the news disclosures. That would immediately inform the reader / viewer as to whose vested interests are being served. For all the severe criticism President Trump is facing, he has highlighted the use of USA money for interference in our Nation political activity. There are vested interests outside India who want to see a destabilized India and sadly there are many powerful & influential press and media commentators who will keep this matter of India poor ranking alive.
We are all aware that the one who pays the piper calls the tune. These rankings and reports will finally closely align with the objective of the Sponsor or the Funding entity.
Income Tax Returns filing — it is a well known fact that very few Indians file Income Tax Returns though very large number of persons possess PAN Cards. It is opined by many Tax consultants and individual income Tax experts that possessing the PAN card is a ruse to escape high TDS rates on dividends income. The TDS (tax deducted at source) on dividends is less if there is a PAN card number submitted by the shareholder to the company. The income tax return will not be filed, though lower TDS rate will be taken advantage of.
'Follow the money trail' strategy could be brilliantly used for such cases where income tax returns are not filed. The process could be as under, thanks to success of the JAM trinity (explosion of Jan dhan bank accounts – Aadhaar card – mobile phone). Many possess bank accounts now:
Distinguish the income tax returns filers from those who do not file returns. Mainly, savings bank accounts and PAN Card numbers are linked. In the month of April (start of new accounting year), the bank savings account holder (above 21 years of age) with linked PAN Card # informs the bank whether he has filed an income tax return – in April '25, the individual submits proof of submission of income tax return for accounting year 2023-24.
If there is proof of submission of income tax return, the Role of the bank ceases. However, if there is no validation of income tax return being submitted, the banker has to play an important Role.
For those over 21 years of age, every month based on credits in the savings account of those not filing income tax returns (except interbank funds transfer), the banker does a Tax collection at source (TCS) at say 12% of the total monthly receipts credit and remits this TCS money to the Central income tax treasury. A TCS % rate between 10-15 % is fair. Every month, the individual's bank account has a debit for tax collected from his bank account. An annual statement of TCS deducted and paid to Central Govt Income Tax is provided.
This way the banking channel is used for tax recovery for non income tax returns filers – on amounts credited to bank account. In case an individual has a problem on high tax collection at source, he / she should file an income tax return and claim the extra tax deduction as a refund. Of course, the Income Tax Dept will need to be invested into to support the higher Returns submissions and assessments.
This 'follow the money trail' policy will see higher individual income tax collection and more income tax returns being filed.
The biggest advantage of this method of 'tax collection at source' is that it impacts all non income tax filing individuals equally. Equity and Justice come back into income tax collection and the income tax base of income tax players expands. Many individuals running businesses in unorganized sector and agriculturists with other taxable income sources would get impacted.
The income tax rules for computing taxable income stay and you have the freedom to file income tax returns and claim tax refunds, as applicable.
CONCLUSION – It is clear that this 'follow the money trail' policy brings transparency in purpose of country ratings and rankings and improves tax collection in India by tapping bank credits.
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Views expressed above are the author's own.