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Photo: Mint

The  govt  wants  to take the pain out of paying taxes

PM Modi will roll out a 'platform for transparent taxation—honouring the honest' in a bid to strengthen the govt’s direct tax reforms. Mint explores some of the recent changes in our taxation policies to understand what they mean.

Prime Minister Narendra Modi will roll out a “platform for transparent taxation—honouring the honest" on Thursday in a bid to strengthen the government’s direct tax reforms. Mint explores some of the recent changes in our taxation policies to understand what they mean.

What are the purposes of pre-filled forms?

The Income Tax department introduced pre-filled forms with the intention of making the process of filing tax forms easier. Linking of Aadhaar card, PAN card and bank accounts enabled the department to pre-fill the forms for taxpayers. The facility has been further extended to ensure the bulk of the details such as bank interest, salaries and tax deductions are automatically filed in the form which can be submitted once approved by the tax filer. Some of these fields were pre-filled in the 2019 form, and for salaried individuals, the move essentially means no need to file an income tax return.

How does this improve the tax compliance?

With pre-filled form, chances of errors while filing taxes get reduced substantially. By making PAN and Aadhaar mandatory, the department has minute details of almost all financial transactions undertaken by individuals and firms. The ease of filing of taxes further encourages individuals to reveal their incomes. Given that a tax filer is now aware of the extent of data available with the tax department, they are more likely to reveal their true incomes. A key advantage, however, will be in terms of making the process significantly simpler for taxpayers. The prospect of a few errors would translate into less tax litigation.

Removing bottlenecks
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Removing bottlenecks

Has the experience of paying taxes changed?

Tax payers’ interaction with the tax department remains an unpleasant one. While the department has recently made attempts to modernize using technology, citizens continue to cite complexity in the system, lack of transparency, and technical glitches. A recent good move has been the introduction of a Document Identification Number for all correspondence.

What  about  the  trauma that taxpayers face?

The I-T department has functioned with the objective of resource mobilization to meet the extensive expenditure commitments. This implies that overzealous officials have created problems for both businesses and industries. There have been instances of assessment resulting in harassment. Such instances often penalize honest taxpayers as they translate into tax disputes that ultimately lead to a long-drawn process of litigation. Consequently, many taxpayers prefer to grease palms in order to save time, money and avoid trouble.

Will  faceless  evaluation help reduce red-tape?

The recent changes to the tax filing process indicate a shift in the mindset of the government which went from viewing the department as one that serves its revenue needs to thinking of it as one supposed to serve the taxpayer. For instance, the Centre has proposed to ease evaluation system by introducing faceless e-assessments. The move will remove the physical interface to remove red-tapism. Faceless e-assessments will benefit honest tax filers, in the long-run.

Karan Bhasin is a Delhi-based policy researcher.

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