For the first time, the income-tax department will use big data analytical tools to go through personal bank deposits to segregate black money holders from genuine tax-payers, two people in the know have said. While the government has used big data analytical tools for corporate tax reporting in some cases in the past, this is the first time that it will use analytics on such a large scale to sieve through personal taxes. “It’s practically impossible for tax officials to go through all the data obtained from banks and compare it with other tax-related data. Analytics is being used to look at discrepancies. This would then be scrutinised by experienced tax officials,” a person close to the development said. It is expected that the tax department would collate and compare data from corporate tax and personal tax as well.



Big data analytical tools will compare the tax returns of individuals, tax paid by companies owned by some people and other tax-related data with data collected from banks on how much money was deposited by individuals. If discrepancies are observed, these analytical tools will raise red flags. Tax officers could then issue notices to individuals based on this after December 31. Talking to ET, another person close to the development, said, “What the analytics tool can throw up is not just the cash deposited in banks by an individual, but details of the income tax paid over the years, corporate tax paid by his company, number of employees he has and whether they too have deposited money recently. Every detail of the individual’s tax history can be known.” The government will target only suspicious bank deposits. The Lok Sabha had last week passed a bill to amend Section 115BBE of the Income Tax Act. Section 115 BBE deals with unexplained deposits in banks and how it should be taxed. According to the amendment, tax officers can now tax such deposits at 60% (plus cess) as against 30% earlier. The new tax law is applicable from April 1, this year. ET was the first to write on November 17 that government was looking to introduce higher tax rate at about 50% to 70% on those depositing black money in bank accounts.



Industry trackers say that lack of mention of a threshold in the amendment to the Income Tax Act could mean everyone who deposited money in banks since April 1, 2016, may be questioned by the taxman. While the tax department would minimise questioning genuine cash depositors, tax officers are looking to invoke something called limited scrutiny, say insiders. “Limited scrutiny means only one or two questions would be asked pertaining to the source of bank deposits. Nothing else would be scrutinised,” said the person close to the development.