Indian Brokers Come Under Scrutiny From Tax Department

by Lorys Charalambous, Tax-News.com, Cyprus

29 June 2005

India's Income Tax Department is said to be targeting the country's stockbrokers in an effort to snuff out and punish cases of tax evasion through the falsification of income.

According to reports in the Indian media, the tax authorities are homing in on brokers and sub brokers which receive more than R50 lakh (R5 million, US$115,000) in broker fees, but which declare less than 10% of this amount in income.

As one senior official revealed to the press: “It is a routine check by the IT (Income Tax) department. However, this can prove to be a major dampener for the overall market sentiment as it can trigger panic selling."

"With markets being buoyant, the revenue department is scrutinising brokers to crack the whip on those who are evading taxes. Secondly, it is also an effort to increase the number of assessees," the official added.

It is thought that some brokers are illegally buying losses through the market to lower their declared level of income and therefore reduce tax. The Income Tax Department has the power to delve back into the previous six to seven years' tax records.

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