Taxman needs to make things simple, not tough
That finance minister Arun Jaitley called up the revenue secretary to instruct him to put off the complicated income tax return form in the face of a huge backlash is good news, more so since the taxman hasn’t done too much to fix the perception of being high-handed as the recent tax demands on Cairn Energy Plc and Cairn India as well as the MAT one on FIIs testify. What is not clear, however, is why the taxman even felt the need to further complicate the form. The reason, it appears, is that as part of the drive to unearth black money held abroad, the taxman wanted details of foreign travel, the funds spent on citizens, foreign earnings, foreign bank accounts and so on. Even if, for the moment, you agree that there is a lot of illegal money stashed overseas, how will asking for details in the income tax form help? The taxman, even today, collects data from airlines on foreign travel, from credit card companies on spending including that incurred overseas, and from money-changers on foreign exchange bought—all of this data, and a lot more, is cross-tabulated with the PAN number of those availing the services. Given this, it is a simple matter to cross-tabulate such data with the income tax returns filed in the normal course—and if there is any excessive foreign travel/spend, individual queries can be raised by the taxman, why make life difficult for the average taxpayer? Indeed, one of the issues raised by the Tax Administration Reforms Commission has been that the taxman is not making enough use of the data got from the annual information returns (AIR).
What is even more odd is that the new 14-page form—it was 12 pages in FY15—goes completely against the simplification the tax department has been trying to implement over the past few years. For one, taxpayers are communicating with the department through email instead of personal visits, lowering the scope for discretion and harassment. A recent innovation is that, for those submitting their returns online, this does not have to be followed up with a signed form that needs to be mailed today—merely replying with your Aadhaar number is to be considered good enough in the future. If the number of income tax returns filed electronically has grown from 2.15 crore in FY13 to 2.97 crore in FY14 and then to 3.42 crore in FY15, it has a lot to do with the ease in filing. Why go back to complicating the form which, due to its saral (simple) nature, found acceptance with the tax-paying public? Indeed, given the large number of irresponsible tax demands and the frequency with which the courts reject such demands, the taxman should be focussing on reducing the huge pendency of such cases, and in penalising officers who raise such tax demands.