QUES . What is Non-filers Monitoring System? Explain how it can increase tax compliance. UPSC IES/ISS EXAM 2022 General Studies. 200 Words. 5 Marks.
HINTS:
What is Non-filers Monitoring System (NMS)?
The Non-filers Monitoring System (NMS) aims to identify and monitor persons who enter into high value transactions and have potential tax liabilities but have still not filed their tax returns. The Income tax department regularly monitors information from high-value transactions involving credit cards, bank deposits among others and matches it with existing taxpayer database to tap potential non-filers.
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How Non-filers Monitoring System Works?
The Income tax department has a very robust non-filers monitoring system (NMS), under which they match the information which is being received from various sources. The sources of information include Statement of Financial Transactions (SFT), Tax Deduction at Source (TDS), Tax Collection at Source (TCS), information about foreign remittances, exports and imports data etc. They get information about high-value transactions and this information is being received online by their facilitation centre and this is matched with their existing database of who is filing returns of income. On that basis the computer generates list of non-filers and stop-filers.
How Non-filers Monitoring System can increase tax compliance?
The NMS can increase tax compliance in several ways:
1 . The NMS helps tax authorities to identify non-filers who may have otherwise gone unnoticed. This increases the visibility of non-filers and makes it more difficult for them to evade taxes.
2 . The automated notices sent by the NMS create a sense of urgency among non-filers. The notices remind them of their obligation to file tax returns and the potential penalties for non-compliance.
3 . The NMS simplifies the compliance process for taxpayers. The system automatically populates tax forms with data from various sources, making it easier for taxpayers to file their tax returns.
4 . The NMS reduces the burden on tax authorities by automating the process of identifying and tracking non-filers. This frees up resources that can be used for other tax-related activities.
Overall, the NMS can help to increase tax compliance by identifying non-filers, creating a sense of urgency, simplifying the compliance process, and reducing the burden on tax authorities.
