Electronic filing (e-filing) of income-tax returns has been mandatory for some time now for companies and other entities or persons who are required to get their accounts audited under the Income-tax Act. It is, however, optional for individuals. Till now, most individuals have preferred to manually file their returns. Is it advisable to continue to do so, or should you take the plunge now and start e-filing your returns?
The process of e-filing is fairly simple. You need to first register on the e-filing website, www.incometaxindiaefiling.gov.in. Fill in your tax returns in the excel spreadsheet format available on the website and then convert it into an xml format file by just clicking on a link available on one of the sheets. Alternatively, you can generate a return in xml format through the tax software that you use. You have to upload this xml file on the website. At this juncture, you can affix your digital signature, if you have one and it has been registered by you earlier on this website. If you do not have a digital signature, you need to take a print out of the form ITR-V generated on the uploading of the xml file, sign it and send it either by speed post or ordinary post to the centralized processing centre (CPC) at Bangalore so that it reaches them within 120 days of uploading.
Advantages of e-filing
The biggest advantage probably is the speed with which your returns will be processed. While the tax department claims that the returns will be processed within four months, one can expect a more realistic timeframe of not more than a year. This essentially means that if you are expecting a tax refund, the refund will be granted to you within a year. The other significant advantage is that since the return is processed by the CPC with no physical interface with you, there are no requests for any extraneous consideration for issue of your tax refunds.
Another obvious advantage is that you do not have to take the trouble of sending somebody to your jurisdictional tax office to file your returns. You can do it from wherever you are (even if you are abroad). You can e-file the return at any time of the day or night at your own convenience. In fact, on 31 July, you can file it anytime up to midnight even if you have missed the time limit for physical filing of 6 pm on that date. No more standing in long queues is required to get your tax return accepted, nor do you face the risk of the accepting clerk refusing to accept your tax returns on some flimsy ground.
The biggest problem faced by most taxpayers who have e-filed their returns so far is that they get intimations after processing of returns showing large demands raised on them. This is on account of the fact that invariably credit for some tax deducted at source (TDS) or taxes paid by the taxpayer is not given. Frankly, this seems to be more of a problem of the tax information network (TIN), which still has many problems in capturing the details of all taxes deducted from you or paid by you to ensure proper credit of taxes. Such demands would arise even if you physically file your tax returns. The faster processing only means that the issue comes up sooner than if you had physically filed your return. One way of ensuring that the problem is minimized is to check your form 26AS for the year from the e-filing website and ensure that all taxes deducted from or paid by you are reflected in that—you can do so without any separate registration.
To correct such demands, you have to follow the procedure of filing an online application for rectification, but unfortunately the experience so far with that has not been so good. The CPC helpline has not been very effective in assisting with such problems. At least, with physical filing, you can explain to the concerned tax officer and get your incorrect demands cancelled. In case of online rectification, very often the revised order reflects the same amount of taxes and comes with added interest on account of the further four-five months taken to process the rectification application. You cannot make another rectification application after your initial online application, unlike in the case of physical applications. Fortunately, the CPC is responsive to feedback and is in the process of addressing such problems.
The other negative aspect is the requirement of physically sending form ITR-V to CPC in Bangalore within 120 days. There is an improvement to some extent. Earlier, you had to send it only by ordinary post, and had no remedy if the postal department lost it in transit. Your return became invalid in that case. Now at least in the case of speed post, one can track the delivery online. However, there is a delay of at least 8-10 days before the website reflects the receipt of form ITR-V. One wonders why centralized collection centres for form ITR-V cannot be opened at least in major cities so that one can file it with these centres and obtain proof of having done so. After all, you need to have proof of having fulfilled your statutory obligation at the earliest.
All in all, the e-filing process seems to have improved over the years. If you are entitled to a tax refund, and your form 26AS reflects all taxes deducted from or paid by you, it may be worthwhile e-filing your tax return. One only wishes that the TIN, which has been in existence for far longer than the CPC but which still has not got to grips with its problems, also gets its act together quickly, so that taxpayers do not waste their time trying to sort out the problems created by the defective system.
Gautam Nayak is a chartered accountant.
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