I may be blamed to offer a shock to your flamboyant investing mood by informing this news. Indian tax authorities are putting to good use their information network to spot evasion and bolster collection in the mutual fund investments. Several investors who had invested a few lakhs in mutual fund schemes and then switched between schemes are now under the scanner. The income-tax department is scrutinising the tax returns of several individuals, who have switched their investments in the mutual fund during the course of a year. This exercise by the Income Tax authorities is primarily aimed at preventing tax evasion rate and ensuring greater compliance to the IT norms. In several cases, the income-tax department has started examining tax returns to ascertain whether investors have short changed the mutual fund scheme by not paying short-term capital gains tax while exiting a scheme before the completion of ! year. Switching schemes does not violate any norms of the Income tax act, but investors have to pay a short-term capital gains tax of 15% for this purpose. All mutual fund schemes are mandated under the income-tax law to list transactions of clients who buy units worth Rs. 2 lakh or more in one financial years. These investors also need to quote the permanent account number (PAN) at the time of investment. So, when the individual buys units in a particular mutual fund, but exits the fund within six months to purchase units in another fund, he will have two transactions in his ledger. And this will add some tax additions in his balance sheet. Both the mutual fund houses independently file annual information returns (AIR) with the tax department of the Government of India.