Tax notices should use simple and straightforward language, not instil fear in minds of taxpayers: FM Nirmala Sitharaman

Finance Minister Nirmala Sitharaman on Wednesday asked tax officers to use simple words in income tax communication that they send to taxpayers and use their power judiciously.

Nirmala Sitharaman, speaking at the 165th Income Tax Day celebrations in the national capital, said after adopting the faceless regime, tax officers must now aim to be more “fair and friendly” in their dealings with taxpayers.

She said the tax notices should not instil a “sense of fear” among taxpayers but should be simple and straightforward.

The Finance Minister said the notice should make it "crystal clear" to the assessee why they are receiving it.

Nirmala Sitharaman also mentioned that there was room for improvement in issuing refunds faster. She asked tax officials to avoid “ham-handed ways” in dealing with taxpayers and said that the action taken should be proportionate to the issue.

She also urged that enforcement measures should be used only as a last resort and goal of the department should be to encourage voluntary compliance.

The finance minister also emphasised that when she says that the tax department should be more friendly and transparent, it does not mean that the tax officers have been unfair all these years.

“Can we explore issuing simple and easy-to-understand notices? Explain the reasons behind why the action was taken and why the notice was being sent,” Sitharaman said.

The minister, stating that she would support the tax department, said that tax officers should continue to perform their sovereign duties.

Taxpayers opting for new tax regime

Finance Minister Nirmala Sitharaman also stated that Indian taxpayers are increasingly opting for the new tax regime.

“72 per cent moving from the old system to this (new system) very clearly shows that this has been now accepted as a very well thought through system, wherein the rates are simple, no compliance headaches, and therefore has become very attractive,” Sitharaman said.

(With input from agencies)