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Ramblings of a citizen and experiences of an entreuprener

This is about my way of life. It has two parts, one is related to the world around me and the other part is my experiences as an entrepreneur. Check out our website www.shaktiindia.com

Thursday, December 17, 2020

Faceless eAssessment: A new tax reform


Tax reforms, has been one of the key focus areas of the Union government. The shift has been towards rationalisation, simplification, greater transparency, and creating an overall taxpayer-friendly ecosystem.  India is in fact one of the few countries in the world to adopt such a system. The scheme will bring in a paradigm shift in taxation by eliminating the human interface in the income tax assessment system. While, less than one percent get assessed every year, this move will give normal taxpayer a sense of relief and feeling of equality.

In essence, the faceless e-assessment is a randomised and automated system based on the concept of dynamic jurisdiction and follows a team-based approach. It eliminates the undesirable practices that emerge when there is scope for individual discretion and subjective judgement. The anonymous nature of the process will discourage high-pitched assessments and lead to objective, fair and just assessment orders. 

A revised Form 26AS, which has details on taxpayers’ high-value financial transactions, like cash deposits/withdrawals and property purchases undertaken during a financial year. What this effectively means is that. Tax dodgers, corrupt babus and politicians who went from rags to riches without any fear, as everything was managed. The averaged salaried tax payer could only fume. Now, a property purchased by a tax evader in the name of his driver will get automatically flagged as the drivers income will not match. So we will surely see more tax payers popping up and why not, it is also time everyone paid their fair share of taxes.

Under the new system, taxpayers will not be required to visit the local office on receiving income tax notices, obviating the need for face-to-face interactions. This also means time saved, as any request for information can be met from the comfort of your home or office. It also means tax consultants will have more time for clients as they will not be sitting in tax offices. The system will bring about a substantial increase in the tax base, by making the process more transparent and taxpayer-friendly.

With reduced hardships for the taxpayer, the faceless e-assessment system will foster voluntary tax compliance. The transparency and objectivity brought in by the new system will reduce tax litigations, which hitherto have been a major challenge. No more, will your local tax officer be in charge of your case. Four geographically separate units operating independently through the National E assessment Centre (NEAC). The four units are Assessment Unit, Technical Unit, Verification Unit and Review Unit. If assessment is done by one unit, review will be by another. And at no time will either tax payer or tax  officer know each other or where they are located. All communication happens through the NEAC and every document has a Document Identification No (DIN).

100% confidentiality will be a challenge as documents will provide some leads to the officer, but given that the system is in place to build trust, it will work out in the long run.

Large-scale implementation of the system is expected to be a big step that would benefit more than six crore income tax return filers in the country. Earlier, when implementing GST which itself was a reward to the honest tax payer, the Government showed willingness to tweak the rules as and when required so as to make it robust and taxpayer friendly. The same is expected with the Faceless scheme, which being new will have teething issues, however given a pilot was running the issues will be lesser. This shift will  create a need for informed recalibration on the part of taxpayers

From Goa’s perspective, Sec 5A is unique and it allows husband and wife to share the income. But, the TDS for bank interest is accounted for in the husband’s return and there was no provision to share it with the wife, creating issues when filing returns. This the department is aware of and required tweaking is in progress.

Over the last few years, the Income Tax Department has undergone a revamp in its approach, from being just a revenue-collecting organisation to becoming a more citizen-centric one by making available various functionalities on line. Technology intervention through the faceless assessment system will also help build trust within industry and wealth creators.

Given, that in India we have many languages, a taxpayer from Andhra would have many documents in Telugu and if the assessment unit is based in Haryana, understanding will be a challenge. Many goans, have documents in Portuguese. The department will consider hiring a translator rather than insisting on translated documents, a welcome step. On similar lines, High Court or Tribunal judgements vary across States, and if tax payer is relying on some judgement, the tax officer in another State will have to be aware. This will bring up the training and sensitisation issues that have to be taken care of in the department.

However, going forward it will not be enough to have a tax consultant who is well connected with the department officials. Only electronic submission is possible, so drafting or ability to explain in writing will be critical. It is going to be important that one has a tax consultant, who is knowledgeable and up to date. Basically, the systems bids farewell to “dalals” as we know them.

The system comes at a very appropriate time, where going digital is the new normal Covid-19 times. Let us wish the department and taxpayers, all the very best in successful implementation of the faceless e Assessment scheme.  

 

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