If you have received an income-tax scrutiny notice, there’s no need to be unduly fearful as the government has sought to protect you against possible harassment.
That’s in line with Prime Minister Narendra Modi’s recent message to the tax department that people should not fear such persecution.
The Central Board of Direct Taxes (CBDT) has made it more difficult for assessing officers to expand the scope of a ‘limited’ scrutiny to a complete one.
They will also have to substantiate any contention of possible under-reporting of income and loss of taxes, apart from requiring approval of senior officers.
The guidelines issued recently by the apex direct taxes body call for assessing officers to form a “reasonable view” that there is a possibility of income under-assessment, said an official aware of the move.
Besides, when manually selecting cases for scrutiny in the current financial year, the threshold for metros has been raised to Rs 25 lakh from Rs 10 lakh for instances involving additions in the earlier year.
That is, if an assessing officer finds that some income should have been added to the declaration, the return can’t be opened for scrutiny if the incremental amount is less than Rs 25 lakh.
In the past two years, the government has sought to make the department’s revenue collection efforts less aggressive and move away from what’s been dubbed by some as tax terrorism.
Modi delivered much the same message to tax officials at a meeting last month. Processes are being made less discretionary and increased reliance is being placed on information technology.
E-scrutiny, which allows payees to reply to scrutiny questions over email in metros, has also been started. These latest directives add to measures aimed at ensuring that tax officers don’t embark on fishing expedition even in cases of limited scrutiny under the Computer Aided Scrutiny Selection (CASS) where the perceived risk area is limited to only that particular transaction.
Tax experts welcomed the move. Together with the new scrutiny formats, this will lead to greater accountability of the tax department, said Amit Maheshwari, partner, Ashok Maheshwary & Associates LLP, chartered accountants.
“This would help save precious resources of the department, lead to early closure of assessments and prevent unnecessary harassment,” he said.
The Income Tax department has widened the ATM-based validation system for filing e-ITRs by taxpayers with the inclusion of Axis Bank, after SBI, as part of its measure to enhance the paperless regime of filing the annual I-T returns.
“Now, Electronic Verification Code (EVC) can also be generated by pre-validating Automated Teller Machine (ATM) provided by Axis Bank. SBI had activated the facility last month. Other banks are also expected to join soon,” a senior I-T department official said.
In May this year, the department had launched the bank account-based validation facility in this regard for those who have not availed the internet banking facility.
The new facility is available on the official e-filing portal of the department- http://incometaxindiaefiling.gov.in/ and will work by using the One Time Password (OTP) verification system as activated by the department last year by using the Aadhaar number.
These measures are used to validate the e-ITR so that the taxpayer does not take the trouble of sending the paper-based ITR-V by post to the Bengaluru-based Central Processing Centre (CPC) for final resolution and processing.
The new ITRs have been notified early this year and taxpayers can e-file their ITRs till July 31.
ITR-1 can be filed by individuals having income from salaries, one house property and from other sources including interest.
ITR-2 is filed by Individuals and Hindu Undivided Families (HUFs) not having income from business or profession.
ITR-2A is filed by those individuals and HUFs who do not have income from business or profession and capital gains and who do not hold foreign assets.
CBDT today issued a notification making it clear that information about those who declare their black money under the compliance window, ending September 30, will be kept secret.
The notification states that “no public servant shall produce before any person or authority any such document or record or any information or computerised data or part thereof as comes into his possession during the discharge of official duties in respect of valid declaration under the Income Declaration Scheme, 2016.”
The notification also quotes provisions of section 138 of the Income Tax Act which states that taxpayer related information is confidential and cannot be shared.
The fresh notification was issued by the Central Board of Direct Taxes (CBDT), a senior official said, as the department was getting a number of queries with regard to the confidentiality under the Income Declaration Scheme (IDS) or the one-time domestic black money compliance window.
Trade associations and industry bodies had also taken up the issue during their meeting with Finance Minister Arun Jaitley recently.
“The notification now gives legal sanctity to the word of the government that all information related to IDS will be kept confidential. It is aimed to end apprehensions in the minds of potential declarants that their information will find its way in the hands of other probe agencies or will reach the public domain,” the official said.
The IDS is open for four months, between June 1 and September 30 and the CBDT and the IT department have introduced a number of measures to make it a success.
CBDT has so far issued three sets of clarifications on Frequently Asked Questions (FAQs) to clear doubts and answer queries about the IDS.
The department has also published a country-wide list of registered asset valuers for those who wish to declare their untaxed funds and properties under this window.
The CBDT has also directed the taxman to step up publicity by advertising about the IDS at posh markets, clubs and showrooms. Besides, it has promised full privacy would be ensured for those making disclosures for better collections.
Under the scheme, the declarants will have to pay a total of 45 per cent in tax and penalty by November this year. Individuals and entities making disclosures will have immunity from prosecution.
IDS was announced with an aim to flush out black money from the domestic economy. It will apply to undisclosed income whether in the form of investment in assets or otherwise, pertaining to financial year 2015-16 or earlier.
Declarations under IDS can either be made online on the official e-filing website of the tax department or before various regional Principal Commissioners of I-T department.
After successfully completing over 1,000 scrutiny I-T assessments under a maiden taxpayer-friendly paperless inquiry system, CBDT is set to extend the initiative as it is mulling seeking taxpayers’ consent to opt for the scheme at ITR filing stage itself.
Central Board of Direct Taxes (CBDT), the policy-making body of the Income Tax department, had launched a pilot project last year to reduce taxpayers’ visit to the tax office and their interface with the taxman.
Under the project, the first set of e-communications were decided to be mailed to the assessees in DELHI, Mumbai, Bengaluru, Ahmedabad and Chennai region.
As per official data accessed by PTI, the department in these five cities has completed scrutiny assessments in 1,001 cases till now, after a total of 6,481 assesses were contacted of which 1,812 responded positively.
A senior official said the biggest “challenge” in achieving better success in this new project was obtaining the consent of the taxpayers.
The Assessing Officers (AOs) found that while in some cases the taxpayer could not be reached as their personal email ids were with their CAs or authorised representatives, in a few other cases the assessee withdrew his consent to join the scheme, the official said.
“It is now being mulled if the I-T department can print a footnote on the Income Tax Return (ITR) or on the scrutiny notice itself that the taxpayer is invited to participate in the exercise over email in a paperless manner.
“The results are encouraging and the CBDT wants to make this an institutional system for scrutiny assessments henceforth,” the official said, adding the scheme is expected to be widened and rolled out with new features within this financial year.
The success of the project, initiated last year, is evident from the fact that CBDT recently added two more cities (Hyderabad and Kolkata), to the existing five metros, under the paperless assessment system exercise.
With this project, CBDT aims to end corruption and bring hassle-free experience for the taxpayers who undergo a time-consuming scrutiny assessment procedure which entails production of a number of documents and financial statements.
The department, however, says it brings only about 1 per cent of cases under the said procedure.
An official notification had been issued earlier which spells out the procedure, formats and standards for ensuring “secured transmission” of emails between the AO and the assessee stating all communication between the two sides will be done in PDF file format and over bonafide email ids.
This followed an amendment in the I-T Act in December last year, which allowed emails to become the new mode of interaction between the AO and the tax-paying individual.
Under the new procedure, the taxman will send emails, for issuing notices and summons, through the government registered ‘@incometax.gov.in’ email domain and the attached PDF document will have his or her designation and signature.
In response to such I-T notice, taxpayers will have to submit the details called for, in a Portable Document Format (PDF) through their email id registered with the department.
The notification states, “Any email, in response to the notice issued by the AO, received from the primary email address of the assessee, shall be considered as a valid response to the notice.”
In the same notification, CBDT had also mandated that the taxman will maintain an audit trail of all e-communication with a taxpayer in the IT department’s central database for future reference and as record management of the entire transaction.
The new directives also allow a taxpayer to physically submit a reply to such e-notices in case of a technical problem in their email. “This shall be treated as adequate compliance,” it had said.
The project was launched after CBDT had asked the I-T department to “initiate the concept of using emails for corresponding with taxpayers and sending through emails the questionnaire, notice etc at the time of scrutiny proceedings and getting responses from them”.
“This would eliminate the necessity of visiting the Income Tax offices by the taxpayers, particularly in smaller cases, involving limited issues and where taxpayer is able to provide details required by the AO without necessitating his physical presence,” the order had said.
The Income Tax department’s ambitious plan to verify ITRs electronically through an internet-based system by using the Aadhaar and banking database has crossed the one crore mark.
As per the latest data, over 1.02 crore Income Tax Returns (ITRS) have been verified by the internet-based electronic filing system of the department.
“The figures for e-verified ITRs stand at 1,02,08,715 as of now. The one crore mark was achieved recently and the department wants this to grow by leaps and bounds so that e-filing becomes more popular with taxpayers,” a senior official said.
The Central Board of Direct Taxes (CBDT), the policy-making body for the I-T department, had first launched the initiative of linking the two databases– Permanent Account Number and Aadhaar– late last year to start a hassle-free and quick electronic filing regime for taxpayers with the help of a One Time Password (OTP) via SMS or email.
The e-filing system allows online verification of a person’s ITR by using either the Aadhaar number, internet banking or bank account along with email and mobile number, thereby ending the practice of sending paper acknowledgment to the Centralised Processing Centre (CPC) of the department located in Bengaluru.
The online ITR filing portal of the department is available at https://incometaxindiaefiling.Gov.In.
According to the rules notified in this regard by CBDT in July last year, any taxpayer whose income is Rs 5 lakh or below per annum and has no refund claims can straightaway generate the Electronic Verification Code (EVC) for e-filing and validating their ITR through their registered mobile number and e-mail ID with the department.
They get a system generated one-time password (OTP) to validate their ITRs with the help of the Aadhaar number, e-banking facility and through the ATM-link in certain cases.
This new measure has eliminated the need of sending the paper acknowledgment called ITR-V through post to the CPC.
Under the same initiative, over 65 lakh linkages have been achieved till now between the Aadhaar and PAN databse.
Prime Minister Narendra Modi (right) and Finance Minister Arun Jaitley at the first Rajasva Gyan Sangam in New Delhi.
Prime Minister Narendra Modi pitched for nearly doubling of tax base to 10 crore assesses while addressing tax officers in the first ever Rajasva Gyan Sangam that kick-started on Thursday.
Modi outlined a five-point charter for tax administrators – RAPID, which stands for Revenue, Accountability, Probity, Information and Digitisation to reform the taxation system in the country.
MODI’S FOUR COMMANDMENTS FOR TAX DEPARTMENT:
Increase tax base to 100 million people from 54.3 million now
Focus on RAPID: Revenue, Accountability, Probity, Information and Digitisation
Ensure simplification and go for total digitisation
Turn Gyan Sangam into a Karma Sangam, so ideas generated here lead to concrete action on the ground
In an hour-long interaction, he urged officers to build a ‘bridge of confidence’ between tax payers and tax officials, stressing on incorporating a sense of trust in the system so that they pay taxes without fear or harassment.
“While there should be respect for the rule of law among all citizens, and even fear of the long arm of the law for those who evade taxes, people should not fear tax administrators,” Modi said in his interaction with tax officers.
Citing the example of the “Give it up” initiative for voluntarily giving up gas subsidy, he said that the tax base too could be increased significantly, provided the tax administrators can demonstrate the leadership to bring about a change.
This is for the first time that the two boards — Central Board of Direct Taxes and Central Board of Excise and Customs — came together for the joint conference. Earlier they held separate conferences with the Finance Minister as the chief guest.
Modi said that tax officials should act like “mentors of taxpayers” and not treat them as “tax evaders”.
“People of India are inherently honest. If you build trust then people will pay taxes and you will be able to achieve the target,” Modi said.
The conclave will deliberate on a host of issues related to taxpayer services and effective implementation of fiscal laws and government policies with discussions around government’s financial inclusion initiatives, ensuring a transparent tax regime for businesses and foreign investors besides issues and challenges being faced by the two tax departments.
Minister of state for finance Jayant Sinha in a briefing after the first session said, “Prime Minister laid out certain goals and objectives for the officials to increase the tax base to 10 crore from 5.43 crore at present.”
Sinha said of the 25 crore households in the country, 15 crore are agriculturalists and hence the remaining 10 crore should be under the tax net.
Modi in his speech said 92% of tax department revenue comes from TDS, advance tax and self assessment tax, while the remaining 8% comes after scrutiny.
He said if 42,000 officials of CBDT are engaged for ensuring direct tax revenue, then the tax net should increase further.
Stating that the country is filled with “aspirational people”, Modi urged the taxmen to take steps so that people find it easier to pay taxes here.
Prime minister emphasized that people in India mostly pay taxes and the number of people who want to evade it is less.
“People don’t have problem in paying tax. So there is no question of tax evasion. The issue is how much cooperative are we in dealing with people. He said you should behave like mentors with the people rather than evader… If you become taxpayer friendly, then taxes will automatically come to you,” Modi said.
During the brainstorming session, he pressed officers to move towards digitisation besides making tax administration better and efficient.
The two-day Gyan Sangam is being attended by close to 250 officers of the rank of Principal Chief Commissioners, Chief Commissioners and Principal Commissioners from CBDT and 170 from the CBEC.
During the interaction, Modi said if someone Googles ‘how to pay taxes in India’, there will be seven crore results. If the question of ‘how not to pay taxes in India’ is put to Google, there would be 12 crore feeds.
The tax officials in their interaction with the prime minister gave a host of suggestions, which included to setting up of National Tax Facilitation Act to regulate basic norms of tax collection.
Ideas and views were expressed on diverse subjects such as digitization, voluntary tax compliance, facilitation for taxpayers, increasing the tax base, upgradation of digital and physical infrastructure for tax administrators etc.
Modi urged officers to turn the Gyan Sangam into a Karma Sangam, so that the ideas generated from this conference lead to concrete action on the ground.
As many as 15 officers from the CBDT and CBEC posed their questions to Prime Minister on various issues being faced by them in their regular work.
The issues included dilemma over whether officials should act as law enforcement agency or taxpayer friendly agency while collecting due taxes from people.
They also raised the issue of voluntary tax compliance, increasing tax base, upgradation of digital and physical infrastructure for tax administrators.
The income-tax returns filing season is fast approaching with the initial deadline being July 31.
The income-tax returns filing season is fast approaching with the initial deadline being July 31. You must be among those preparing to file your returns. But most tax assessees who are required to e-file their returns keep deferring till the last moment.
However, even if you are procrastinating, you need to be prepared with all the details that you need to provide in your tax returns. And for that you need a lot of documents to be with you. It may not easy to source these documents at the last moment since some have to obtained from your office, some come by mail and others need to be downloaded. And even if you have all of documents with you, you need to have them filed in a file that is easy to locate.
So what are these documents that you need to keep handy at the time of filing? FeMoney asked tax expert Sudhir Kaushik, Co-founder and CFO, Taxspanner.com on documents that are a must in hand. “Keeping documents like Form 16, Form 26AS and home or education loan certificates for obtaining deductions would ensure that your tax filing is hassle-free and complete,” Kaushik said.
Here are a list of documents that Kaushik says one should be ready with while filing tax returns:
Form-16 and Form-16A
Form-16 is the most basic source of information about the income earned and the tax deducted from your salary during the year. In case you have worked for more than one employer during the financial year 2015-16 then you must collect your Form 16 from all of them. Form 16-A form is also called a Tax Deducted at Source (TDS) certificate and is issued by banks for interest income, capital gains of NRIs, etc. If you have rental income and your landlord has deducted TDS on rent then you should collect Form-16A from the landlord too. Similarly, if you have any commission or professional income, TDS certificate for the same should also be collected.
Form-26AS
Your income from all sources, tax deductions and any high-value transaction(s) are reported in this form. I-T department sends notices if the ITR filed by the taxpayer does not match with the information available in Form-26AS. You should get your Form 26AS and match details with your ITR before filing it. If there is some mismatch, you should fix those errors and then file your return. You can download Form-26AS from your net banking account, directly from income-tax department’s website.
Bank statements from all bank accounts
You should verify that all the bank transactions carried out during the financial year with respect to income earned, investments made, expenses etc. have been declared in the appropriate sections of your return. This would show dividend income or gifts received above Rs 50,000 on which tax needs to be paid.
Home/education loan interest certificates
If you have taken any home/education loan then collect their interest certificate from the lender to claim the right deduction.
Investment proofs not submitted to employer
It is possible that some of the investments made by you during the financial year have not been included in the Form-16 issued to you. For example, if you invested in tax-saving tools such as life insurance, Public Provident Fund after proof submission deadline set by your employer, proofs of these investments would not have been submitted to your employer. For such investments, you need to have the proofs for reference while preparing your return.
Share/mutual fund transaction statements
These are required to enter details like sale date, purchase date, quantity and amount for computing capital gains/loss.
Tax payment challan(s)
If you have paid advance tax and/or self assessment tax then you need to enter the details of the same in your return for accurate computation of tax liability.
