By now, most of you would have already filed your income tax returns as the last date is fast approaching (July 31). Theoretically, you could have filed it much earlier, but perhaps it is better to be late in this case. Reason: Systemic issues may come in your way of filing returns early.
Many of these issues are chronic and taxpayers have been enduring these over the years. So far the authorities have turned a blind eye towards these flaws. But it is being hoped that with a new version Income Tax Act, that is, Direct Taxes Code (DTC) on the anvil, the following procedural creases would be ironed out. Here are some of the issues.
Tax filing timeline
Theoretically, we have four months (from April 1 to July 31) for the purposes of filing income tax returns. However, the Income Tax (I-T) department does not publish revised forms and related instructions until well past April 1. Therefore, though in theory we are permitted, actually entitled, to file our tax returns as early as possible in the financial year, in actual practice we are officially hindered from doing so until much later.
Role of financial institutions
Even banks and other financial institutions have a role to play in your not being able to file tax returns before the deadline. More often than not, most institutions (who are involved with deducting tax at source or TDS) do not provide the Form 16A (detailing TDS for the investor) until the month of June. Very often repeated requests to get the form issued earlier fall on deaf ears. If one is lucky to get a response, the same is that the systems are down.
Even information regarding the accurate and final amount of interest income earned is difficult to know in good times since interest certificates for the previous financial year not are issued sometimes until the month of May. This inhibits correct accounting of both incomes and TDS deducted, particularly relating to cumulative deposits.
Consolidated tax statement
Then there is the Form 26AS. As most taxpayers would know, the Form 26AS is a consolidated tax statement that includes details of TDS, Tax Collection at Source (TCS), Advance and Self Assessment Tax, tax refunds issued if any, as also the details of mutual fund investments, shares and bond transactions pertaining to a taxpayer. This statement or form can be obtained from the I-T department's website.
In many cases, the information pertaining to TDS contained in this form does not match with the actual income of the taxpayer. That is, a taxpayer has earned an interest income and suffered TDS, but inspite of having provided the accurate Permanent Account Number (PAN), the Form 26AS does not reflect this.
Many readers would relate to this problem. Apart from communicating with the institution to resolve the issue, the other way out for you would be to quote the physical TDS certificate number (CIN) at the time of filing tax returns. This way you can get credit for the tax deducted. However, there is considerable confusion regarding this. Many experts seem to feel that if the Form 26AS does not reflect a TDS entry, credit for the same cannot be claimed by a taxpayer.
The law requires us to pay taxes on capital gains earned if due by the end of a quarter in which these are generated. Indexation of long-term capital gains is permitted, but the I-T department does not provide the index figure for a financial year usually until almost the end of the year. Then how will the taxpayer correctly compute his dues? Instead of asking individual taxpayers to make educated guesses, the simplest thing to do would be to declare the index applicable in a timely fashion - say a week or so before the first advance tax payment due date.
This year, individuals earning Rs 10 lakh and more have to file their tax returns electronically. While any step that uses available technology for greater efficiency is welcome, in doing so, we should not lose perspective. We are a developing country and there are many who are not used to computers. E-filing presupposes a working knowledge of not only how an operating system works, but also the internet and the software(s) that enables e-filing returns. A case in point are the senior citizens. Though there are exceptions, several seniors are not comfortable or familiar with computers, especially if they need to use it only for this.
Another assumption of this move is that every taxpayer concerned has access to a computer. Those who do not have access would now be forced to seek outside help. Sure there are chartered accountants (CAs) and other professionals who can provide this service. But this comes at a cost. Not to mention the practical difficulty of service providers increasingly going after the big fish and having no time or inclination to service the small taxpayer. An exception to e-filing for senior citizens could easily be provided if the authorities so desire.
The issues highlighted here are drawn heavily from a reader, N Patel's e-mail. His astute observations succinctly captures and summarises the collective angst individual taxpayers have against systemic inefficiencies. While the government is trying to replace the I-T Act in order to make the law simpler, it is submitted that unless the system is made user friendly, the means cannot be justified. It is sincerely hoped that the department would take corrective actions.
The writer is Director, Wonderland Consultants