It is unfortunate that the new income-tax return form makes filing of tax returns more cumbersome for salaried taxpayers, whose taxes are assiduously deducted at source. A taxpayer will now be required to provide details of her income from salary — such as perquisites, taxable and non-taxable allowances, profit in lieu of salary — and house property.
Tax authorities acknowledge that the information is already available in the certificate (read: Form 16) issued by the employer. It can also be obtained from the annual return filed by an employer of tax deducted at source (TDS) from salary. More paperwork, and reverting to the pre-digital era, makes no sense.
With a modern, networked tax administration, employees must get pre-populated returns, using the data that the company provides to the tax department while withholding tax. Employees can provide any additional information — such as savings that are tax-exempt under Section 80C — to complete filing their returns.Preferably, the government should tell a taxpayer her dues, and not vice versa. An abysmal 3.7 crore individuals filed tax returns in 2015-16, and only 24 lakh declared income over .`10 lakh. The effective taxpayer base — all filers and non-filers who paid tax as advance tax or TDS — also stood at a modest 8.27 crore in 2016-17. Tax evasion is rampant among the self-employed, especially professionals, and in the unorganised sector.
But the good news is that the audit trails created by the goods and services tax will generate a unified base of tax potential that should be tapped. Following these trails, and complementing them with big data analytics, will help raise the share of revenues from direct taxes, which is a meagre 5.6% of the GDP now. Easing compliance, lowering rates and acting tough against evaders will encourage people to pay up.