Govt likely to bring back single tax return system for search cases

Single return may cover six years plus part-year when investigation is done

Individuals and businesses facing income-tax searches will be able to file a single return covering six years plus the part-year in which investigation is done, instead of filing separate returns for each year concerned, according to a government official.

 

This aligns with the block-assessment scheme introduced last year for search and requisition cases. This took effect on September 1, 2024. The scheme mandates the income for the block period be assessed as a whole, rather than separately for each year.

 

According to the official, this will reduce legal disputes and make tax assessment quicker and easier. He said: “This system was in place from 1995 to 2004, requiring taxpayers to file one return for all undisclosed income spanning multiple years. Bringing it back will help prevent reassessments of the income already disclosed.”

 

Last year the government changed tax laws to allow authorities to examine income for the previous six years plus the search year.

 

Another official said: “The new system will help resolve search cases faster and ease the compliance burden on taxpayers. It will also make tax administration more efficient.”

 

According to Chetan Daga, founder of AdvantEdge Consulting, this is an important initiative aimed at eliminating duplication in tax proceedings for the block period.

 

“A key question is whether this system will resolve timing differences in income recognition. If tax authorities say a certain income should be taxed in Year 1, but the taxpayer reports it in Year 3, will the consolidated return eliminate such discrepancies? Another crucial aspect is the treatment of losses and refunds across different years. Will the new system allow losses in a later year to be set off against income in an earlier year? At present, no such provisions exist. If these benefits are not incorporated, the consolidated return would merely serve as a combined filing of separate annual returns, offering little more than administrative convenience by replacing multiple forms with a single one,” Daga stated.

 

In a nutshell

 

Benefits of the new system:

> Reduces legal disputes

> Speeds up tax assessment processes

> Prevents reassessments of income already disclosed

 

Government’s objective:

> The change aims to resolve search cases faster

> Ease the compliance burden on taxpayers

> Improve tax administration efficiency