Direct Tax

Report No.27 of 2017 - Performance audit Union Government Assessment of Private Hospitals Reports of Department of Revenue - Direct Taxes

Date on which Report Tabled:
Fri 28 Jul, 2017
Date of sending the report to Government
Government Type
Union Department
Direct Tax
Sector Taxes and Duties,Finance


The performance audit covered the achievement of objectives behind the introduction of tax incentives specific to the healthcare sector and deriving an assurance that the existing systems and controls are adequate for compliance of provisions specific to the healthcare institutions and medical professionals under the Income Tax Act. It also included the examination whether all types of healthcare institutions were effectively covered in the tax net of the Income Tax Department (ITD), and assessment of the adequacy of efforts made by ITD towards this.

Deficiencies were noticed in the monitoring and control of Tax base of assessees engaged in private healthcare sector, Tax incentives available under the Income Tax Act for Private Healthcare Facilities. Audit found deficiencies in application of other provisions of Income Tax Act availed by healthcare sector assessees.

Systems and mechanism operating within ITD could not be used to link third party datafor cross verification to extract potential assessees.Mechanism available with ITD for widening of tax base needed modification to be more effective.Lack of measurable definition of “charitable Purpose obviates ineligible assessees to avail exemption.Lacuna in section 35AD of Income Tax Act resulted in excess deduction and loss of revenue. Donations were not being watched properly due to absence of provision in ITD module to enable validation of section 80G certificates. Expenditure which were held as disallowable and unethical had been allowed by the ITD.

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