Tax department redesigns 30 forms ahead of new Income-Tax Act rollout

The tax department has proposed a major redesign of 30 high-volume income-tax forms to reduce duplication, simplify compliance and support a data-driven regime under the new law

A major redesign has been proposed in 30 high-volume income-tax forms to reduce duplication, simplify reporting, and make them compatible with a data-driven tax administration system. 

Part of the draft “Income-tax Rules and Forms”, put out for public consultation, the forms for redesign include the one for applying for the permanent account number (PAN), the one for making a declaration without the PAN, and the form for not having to deduct tax at source (TDS). 

Together these account for over 300 million annual filings, according to sources in the Central Board of Direct Taxes (CBDT). 

Apart from these, there are business-related forms such as tax-audit reports and the form for foreign remittances. 

One of the biggest changes relates to declarations without the PAN. Earlier, individuals without the PAN had to file Form 60 for as many as 21 types of transactions, separately at that for each bank or financial institution. 

Nearly 130 million such declarations were filed every year, many of those manually even when the transaction data was available through banking systems or digital payments, according to CBDT sources. 

Where information is available through banks or digital platforms, filing Form 60 on multiple occasions will no longer be required. As a result, the number of filings is expected to fall by 90-100 million a year, significantly cutting paperwork for both taxpayers and banks. 

The department has simplified the procedure of applying for the PAN. Earlier, Forms 49A and 49AA were required for this. They were long and followed a one-size-fits-all approach. 

With nearly 50 million applications being filed annually, even small inefficiencies created a heavy compliance burden. Under the new rules, PAN forms have been split, based on individual and non-individual applicants, with fields reduced from 18 to 14 and sub-fields from 47 to 20. 

For individuals, the existing form has a field where the applicant can specify how her or his name should be printed on the PAN card. This field has been removed in the new form. 

The existing form asks if the applicant was known by any other name. This too has been removed. 

Due to the separation of forms for individuals and non-individuals, inapplicable fields have been removed

  Another reform targets business compliance and litigation reduction. Businesses earlier submitted audit details in Form 3CD, which often did not align fully with formats on the income-tax return. Even minor mismatches could lead to notices, additions, and disputes. Under the revised rules, the new tax-audit report format (Form 26) has been aligned with the income-tax return, and audit data will be auto-populated wherever possible. 

Officials said this would reduce duplication, minimise errors, and help prevent avoidable disputes. 

To reduce taxpayer errors, the department has merged Forms 15G and 15H, which were used by depositors and senior citizens to avoid TDS on interest income. Wrong selection of the form was common and led to rejections and followups. Under the revised rules, a single “intelligent form” will replace both, with the system determining eligibility automatically. Data-entry fields have been reduced by around 42 per cent. 

The reforms also aim to help very senior citizens, aged 75 years and above, for whom return filing can be burdensome. Form 12BBA has been simplified into a basic authorisation form, allowing the seniors to authorise banks to compute and deduct tax.  Fields have been reduced by about 46 per cent, and many such taxpayers may no longer need to file returns, sources said. 

Form 12BBA is used by senior citizens to receive pension without TDS if their aggregate income is below the taxable limit. 

The new forms will ensure that a startup is not required to reply to questions meant for sectors such as mining or manufacturing. 

According to officials, data entry in key business forms has fallen by 40-46 per cent, improving ease of compliance without weakening reporting standards. 

“The focus on simplifying the forms is a welcome step, and is in line with the government’s focus on simplifying the tax regime. While a significant number of redundant fields in the forms are proposed to be removed, the data otherwise to be entered into the form remains at similar levels,” said Chetan Daga, partner, AdvantEdge Consulting. 

“There won’t be significant reduction in the effort of the taxpayer in filing the form. It is desired that the forms be re-modelled to optimise the information asked for, and suitable clarifications should be issued about what the taxpayer should fill in the respective fields,” Daga added. 

This will affect not just companies but also taxpayers, tax professionals, senior citizens, small businesses and cross-border transactions ahead of the new Income-tax Act coming into force, CBDT sources said. 

The rewrite was carried out by over 150 officers. The department also held consultations with taxpayers, professionals, businesses, auditors and reporting entities, officials said.