Digitising taxation to streamline administration & improve compliance

Pratap Singh

With the rise in technology adoption and digitisation, government departments have been taking recurring initiatives to enhance citizen centricity and augment service delivery. A classic case is of the Incom Tax department wherein digitisation has enabled citizens to file for returns, track progress of the transactions, and even report grievances online. Pratap Singh, Principal Commissioner, Income Tax, Gurugram, in an exclusive interview with Vijay Vardhan and Adarsh Som of Elets News Network (ENN), elaborated on the digital transformation in the department.

In your opinion, what are the major challenges regarding tax compliance, both from the citizens’ & Tax department’s perspectives?

Taxation is a very old concept, as old as civilization itself. We find detailed mention of taxation in ancient Indian texts like Manusmriti, Arth Shashtra, Kalidas Raghuvansham, etc. The authority to levy a tax is derived from the Constitution of India, more particularly Article 265, and the seventh schedule. The taxes belong to the people of the country and are used towards nation-building, social welfare, and payment of taxes is akin to national service. It is therefore a legal and moral duty to pay taxes.

Broadly speaking, tax compliance is payment of appropriate taxes in time, reporting correct income and filing tax returns in time. As per an old study (some 20 years back), in India, compliance in terms of filing of tax returns was about 58 per cent and reporting correct income was 65 per cent. However, since then there have been a lot of improvements in tax compliance, which is reflected in the payment of overall taxes, and the number of tax returns filed. This has happened due to progressive tax policies and reforms undertaken by the Government. Also, improved tax administration, especially with the use of information technology, has added positively to the development.

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Globally, it is seen that tax compliance improves with rational tax structure, simplification of tax laws, payment procedure, tax education, tax awareness, handholding of taxpayers, and further simplification of processes. It also improves when you appreciate taxpayers’ contribution towards the exchequer and how it contributes to nation building. In the last 3-4 years, there has been a lot of emphasis on facilitation, tax education, awareness, and outreach programmes. Also, greater emphasis has been laid on appreciating the taxpayer’s contribution from the highest level.

Besides, enforcing the law has also become better with the 360-degree profiling of taxpayers and mechanism of Annual Information Returns (AIR) and improved 26 AS Form. Now it has become really difficult for a citizen to evade taxes. The motto of the tax department is efficient and fair tax administration, and non-adversarial tax regime; which is reflected in our vision statement – “To partner in nation building through progressive tax policies, efficient and effective administration, and improved voluntary compliance.”

The mission of the tax department is “to enforce tax laws with fairness and to make compliance easy”. In this regard, Ayakar Seva Kendras have been established across the country to help taxpayers. Also, efficient grievance redressal mechanisms are placed which are monitored at the highest level and a Citizen Charter has also been issued. Besides, a lot of online resources are available on income tax websites along with some very useful YouTube videos. Besides, a help desk is available for a taxpayer to lodge a complaint, raise a query, or even call up an officer.

It is perceived that using digital technologies increases tax compliance. What is your take on this?

The use of digital technology has a tremendous impact on tax compliance. Now the entire tax system is fully automated, and a person can pay taxes online at any hour of the day. Similarly, he can file for returns at any time, even on a holiday or at night. The returns will be directly credited to his bank account. He can file grievances online and can track progress as well. Citizens need not visit a tax office for any of the above mentioned processes as these services have been made available online.

Besides, the department collects a lot of data from various sources. This data can be analysed through data analytics or AI & ML tools in non-intrusive ways and shared the outcomes with the taxpayers. The mechanism of Form 26 AS also helps a taxpayer to look at his income/ transactions from all sources and report the correct income. The mechanism of e-verification through which we share various unreported transactions with taxpayers will help a big deal. It will also help in reducing unnecessary litigation and will create more trust and thus better compliance.

The department is in the process of sharing prefilled tax returns with taxpayers shortly, which will further improve processes. The increased tax collection and higher number of tax returns is testimony to this. This could be possible only through digital technology. We have been pioneers in inducting technology in a big way. Today, we are working with Infosys and TCS along with IBM and Bharati. Digital tech is the future of governance, and more so of tax governance. Today, we are among the top few tax administrations in the world and many countries’ tax officers visit our facilities on an annual basis. We are a strong voice in international tax foras like G-20, IMF, FATF, and UN and have contributed significantly in building the global tax system.

It is observed that many people contact a CA or some person from their office’s accounts team to file ITRs. Why is the scenario so? What steps are being taken by you to ease the filing process and make people more aware?

The process of payment of taxes and filing of tax returns is fully automated through e-filling portal. As far as simple tax return is concerned like-ITR-1, it is just one page
simple return, and an educated person can fill in various details on his own, without much outside help and can submit. In fact, this will be taken care of by a prefilled returns mechanism, which will be shared with taxpayers shortly. The only thing a person has to do is sign such a prefilled return and send it back to the tax department.

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However, the business tax returns like ITR-5 and ITR-6, require little more details related to the business like turnover, expenses, loans, creditors, losses, assets, etc. Such information is captured in a few schedules online, so a bit of basic knowledge of accountancy and taxation laws is required but a trained accountant should be in a position to do it, in most of the cases.

Since CAs are tax professionals, they are well versed with the taxation law and procedure and therefore can do it faster and without errors. This may be the reason that many people approach a CA. In any case, a business has to get its accounts audited by a CA. So they are already in touch with them. So it’s not only for tax filing but for audits and assorted services/certifications that they may have to go to a CA.

In last few years, the Govt. has taken a lot of initiative in simplifying the tax law & procedure as well as streamlining the return form. However, in automated mode, some basic minimum information is necessary to compute the tax liability of a person properly. Earlier we had launched a tax return preparer scheme, which worked well. A lot of online resources on departmental website & pamphlets & booklets are available and help is rendered through Ayakar Seva Kendraa. Also, a person can call up the departmental help desk for any clarification or help. Still, in bigger cases, the guidance of a CA may be required to file a tax return in an error-free way.