Income Tax Department initiates comprehensive profiling of HNIs involved in tax evasion. Details here

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high-net-worth individuals (HNIs) who engage in tax underpayment, according to Financial Express. This decision follows the department's discovery that the reduction in the highest tax rate on personal income from 42.74% to 39% in the FY24 Budget has not deterred tax evasion among HNIs. The department is currently engaged in a comprehensive “360-degree profiling" of individuals who have either reported or are likely to have an annual income exceeding ₹1 crore.

This involves scrutinizing their investment patterns, expenditures, and income sources. Additionally, the department has indicated that the count of taxpayers who declared an annual income of ₹1 crore or higher in FY23 significantly lags behind the true count of individuals possessing such income. This implies that a substantial portion of HNI individuals may be engaged in tax underpayment.

Once the screening process is finalized, the department will issue notices to those individuals who have inaccurately reported their income. In this year's Budget, the government reduced the surcharge for individuals with an annual income of ₹5 crore and higher, resulting in a significant decrease of 374 basis points in their effective tax rate. Nevertheless, the department has determined that this change did not achieve the intended outcome of deterring tax evasion among HNIs.