Ajay Thakur is good at number crunching. And filling out complicated income-tax return forms. A chartered accountant, his books are always in order and he files his income-tax return on time every year. But post budget, Thakur is a worried man. With his gross annual receipts exceeding Rs 10 lakh, his income tax responsibilities have suddenly increased manifold. He now has to deduct tax at source before he hands over his rent cheque of Rs 12,000 to his landlord every month. Worse, he then has to deposit the tax deducted at source (TDS) amount in a public-sector bank branch, quoting his tax deduction account number (tan) and his landlord's permanent account number (pan) on the challan. This will also apply to payments made to his doctor, his interior designer and his carpenter if their bill exceeds Rs 20,000.

Saral no longer means simple. And professionals like Thakur are beginning to feel that honesty is no longer a virtue. For in a bid to stamp out tax evasion, the Budget has made it mandatory that monetary transactions of professionals who have an income above Rs 10 lakh and businesses with over Rs 40 lakh turnover will be subject to TDS (see table). And in the process added to their worries over income tax.

What began in 1996 as the one-by-four scheme has now gained momentum, with the Income-Tax Department putting everything under the microscope. The taxman is on the lookout everywhere-in car showrooms, in nursing homes, in hotels and in clubs. Right from cell-phone bills to electricity bills, credit cards to bank transactions, anything that can let out your financial secrets is on his radar. The Budget has made it compulsory for an individual's pan to be quoted in a whole gamut of transactions-from big dealings like the purchase of a car to something as simple as opening a bank account or buying a cellular phone. Even parties that run up a bill of over Rs 25,000 will require the pan of the person picking up the tab. The Budget has also introduced stiff penalties against tax evasion. The penalty for quoting an incorrect pan is Rs 10,000. Under-reporting of income carries a penalty of up to three times the actual tax liability and a delay in filing of income-tax returns may attract a fine of Rs 5,000.

What will probably add punch to the Income-Tax Department's drive is the third-party surveillance that the new rules entail. Income-tax officials will be regularly scrutinising the ledgers and databases of banks, stock exchanges, telephone companies, electricity boards, even the regional transport office to monitor all transactions above certain limits. Says an income tax official: "Computerisation allows data from multiple sources to be collected and analysed very quickly and comprehensively."

However, many feel that this drive against tax evasion and widening the tax net will hurt honest taxpayers the most because it will increase their tax responsibilities. "The new initiatives will mean more corruption and harassment for honest taxpayers," says Delhi-based tax consultant Subhash Lakhotia. Adds Sanjeev Manchanda, partner in Manchanda & Manchanda, a Delhi-based chartered accountancy firm: "In principle, it is a good idea but its implementation will be difficult."

That's not the only problem. Under the new rules, a simple bank transaction above Rs 50,000 can invite an explanation call from the banker. Lakhotia says that this provision would encourage businessmen to do cash transactions to avoid scrutiny by the authorities. "Big investors are smart. They know how to work their way around the system," says Lakhotia.

But the Income-Tax Department differs. "There's lot of money in the unorganised sector which goes unaccounted for," says an official. He is right. In a country where 70,000 luxury cars (each costing over Rs 8 lakh) are sold every year, only about 72,000 taxpayers reported an income above Rs 10 lakh in 2001-2. Only 23 million, or less than 3 per cent, Indians file returns. Black money transactions have come down in the 1990s but are still estimated at 25 per cent of the country's GDP.

The measures to boost tax collections have been backed by an organisational overhaul at the Income-Tax Department. The restructuring, which was completed last year, emphasises on fewer files per officer and lesser number of officers under a commissioner for speedy settlement of disputes and better service. This is being complemented by a Rs 130-crore countrywide computerisation programme. The four metros and 57 other cities, which together contribute 80 per cent of the total income tax revenue collected in the country, have been computerised. The plan is to computerise operations in almost 500 cities across the country for quicker processing of income-tax returns, tax refunds and pan card applications.

The internal revamp is being matched with an external image makeover. A comprehensive website, incometaxindia.gov.nic, will be operational by May end replete with all income-tax rules and regulations, forms that can be downloaded and a tax calculator. All this will be buttressed by a Rs 6-8 crore media campaign to educate and inform people about their tax responsibilities.

While the effort is laudable, its implementation looks doubtful. Even though it has made pan mandatory for most monetary transactions, the Government is still struggling to allot 19 lakh pans to waitlisted applicants. Also, there will now be a deluge of tan applications because of the new TDS provision. Besides, though TDS has been made compulsory, it normally takes the government over two years to refund excess income tax collected from citizens. And while the Government drags its feet on disputes, claims worth thousands of crores of rupees remain unsettled.

Clearly, the Government has got its focus all mixed up. It should have tried to boost tax collections by bringing in non-taxpayers into the tax net. Instead, it has ended up putting an additional burden on those who already do. Also, the Government must gear up the official machinery before taking steps like making it mandatory to quote pan for everyday transactions. There is no doubt that in the long run such measures will help diminish the parallel black money economy. But if you have a backlog of 19 lakh pan applications-to which will be added the tan applications-income-tax compliance becomes a cruel joke, with tax evaders having the last laugh at the expense of honest taxpayers.