Ten Ways The Income Tax Department Can Reform Itself To Get Taxpayer Buy-in ?

Starting income tax data was in the news recently that only 1.2 crore, or 1% of Indians paid income taxes. Check with the tax department revealed that the data was somewhat unrepresentative, as it only considered taxes on salaries. The number of individuals paying taxes is close to 5crore or 4% of the population.

At the same time, the tax department did confirm that the number of individuals claiming to have an income greater that Rs 50 lakh annually is only 150,000 in a country of 120 crore people.

Hence, the tax department’s assertion that there is significant amount of tax evasion in the country may not be incorrect and the so-called hostility with which our tax officials approach taxpayers is somewhat justified. They could argue that if people behaved, they would not have to be so rough.

At the same time, there are constant reports of genuine taxpayers claiming harassment and persecution by tax officials. The tax department many income earners say, starts with the assumption that the taxpayer is in the wrong, deliberately complicates rules, comes after you only because you decided to pay taxes (while ignoring or remaining blissfully unaware of the real tax evaders and doesn’t seem to be getting any better.

 As the Indian economy gets bigger, we invite more foreign investment, and try to expand our tax base, some reforms are needed in the way the tax department does its job. It is one of the few government departments that are in constant touch with citizens. If it continues to operate in an archaic and hostile manner, much of the benefits of policy reforms will never accrue to the economy. Here are ten concrete, doable ideas on what the tax department can do to tax, but with love.

First treat the taxpayer as a customer. The current tax department mentally is to act like police and approach the taxpayer as a criminal unless proved otherwise. It is tough to make people part with their money in any case. The last thing you should do is not be gracious about it. Without the taxpayer, the government can’t function. Seeking the taxpayer as a customer means taking constant feedback, having service benchmarks and presuming guilt.

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Tax grievances: Income Tax department to ensure ‘E-nivaran’

The income tax department has launched a special electronic grievance redressal system called ‘e-nivaran’ in order to fast track taxpayer grievances and ensure early resolution of their complaints.

A separate and dedicated window for grievance redressal has been launched recently in the has been launched recently has been launched recently in the income tax business application (TBA), the new smart electronic platform for the regular operations of the department.  

The facility is called ‘e-nivaran’ (electronic solution and acts to integrate all online and physical complaints gathered by the department at this platform which will be monitored by the Assessing officer of the case upto the supervisory officers in a paperless environment.

The new system is called unified grievance management system and is acronymed ‘e-niravan’ The system not only records the origin of the grievance on the electronic platform it works on but it also keeps tracking it till it reaches its logical conclusion for final resolution “a-senior IT official said.

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Amendments in Income Tax Rules

The income tax department came up with a new form making it compulsory for salaried taxpayers to provide proof of travel for claiming tax deductions on LTA/LTC.

The new form 12BB needs to be produced before the employers by the employees with evidence in relation to house rent allowance (HRA) if it exceeds more than Rs. 1 Lakh per assessment year.

The required details include name, address, and PAN of landlord where the total rent paid is over Rs. 1 Lakh.

Similarly in the case of tax deduction on LTA/LTC, employee needs to furnish travel expenditure to the employer.

CBDT extended the time limit for depositing TDS on transfer of immovable property from 7 days to 30 days.

Also due date for quarterly TDS returns in Form 24Q, 26Q and 27Q was extended by 15 days. These rules will be applicable from June 1, 2016.

An employee can claim tax deduction of Rs. 1.5 Lakh from the total taxable income if invested/spent in PPF, life insurance schemes, child tuition fee, home loan repayment among others.

Section 80E provides for deduction of interest on loan taken for pursuing higher education.

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