Transparent Taxation in India: A scheme to honour taxpayers

Varun Hariharan

13 Aug, 2020

Prime Minister Mr. Narendra Modi has brought out a scheme for transparent taxation to honor taxpayers’ needs within the country.  This initiative was brought out on 13 August 2020 to produce desired results for taxpayers in the country. In the last 4 years, the current government has brought out different benefits for taxpayers in the country.

The primary motive of the government is to fulfill the vision of the Prime Minister. The Prime Minister’s vision is to empower the taxpayers of the country, establish transparency in the dealings with the government, and honor the taxpayers.

For this, the Finance minister and the Central Government have brought out the scheme of transparent taxation in the country. This framework is introduced by the Central Board of Direct Taxes (CBDT), the main authoritative body of the Income Tax Act, 1961.

Under the transparent taxation scheme, the CBDT’s main aim is to promote transparency between the taxpayers and authorities, increase efficiency, and improve the governance of tax within the country.

What are the Main Features of Transparent Taxation?

The government, with a view of increasing transparency in the country, has introduced transparent taxation.

Some of the essential features of this framework are:

Faceless Assessment and Compliance- Through this system, there is a new system of faceless assessment. Hence taxpayers do not require any in-person visits to the income tax office and the income tax department. All the filing of tax returns can be carried out online without the need for physical visits.

Appeal- Through this system, the CBDT has also allowed faceless appeals where a dispute can be referred online to the authority. Once the dispute is referred online, the authority will prioritize settlement of the dispute expeditiously.

AI and Data Analytics- Artificial Intelligence and Data Analytics are the new normal, extensively used in government departments. The government has clarified the use of these technologies for the selection of tax.  This technology will also be used in the allocation of cases. Through this comprehensive tax system, taxpayers can also be guided to carry out the online filing of returns in an easier way.

Revocation of Territory- Through this framework, the Central Government has revoked the territorial jurisdiction system for filing and assessing tax. As the Union Government introduces this system at a Pan India Level, they have removed the requirement for the territorial tax aspect. Through this framework, there will be a system of dynamic jurisdiction prevalent in filing tax returns and assessments.

Automation- This framework has introduced automation for the allocation of cases. Through this system, cases can be expedited by the CBDT.

Document Identification Number (DIN)- Apart from the above features, this system has introduced a new system for identification. This means that all communications coming through the tax department will be documented. Such documents will have a unique identification number to promote the authenticity of the document. This will increase the traceability and authenticity of documentation coming through the income tax department.  Through this, DIN prefilled forms will be provided to the taxpayer. The transparent taxation scheme allows taxpayers to follow proper compliance with the rules.

No physical presence required– Through this transparent taxation scheme, the government has reduced taxpayers’ requirement to come in person to submit tax returns and filings. All tax returns and fillings can be made through electronic systems. This system’s primary goal is faceless compliance, which can be achieved through the transparent taxation regime.

Team Assessment- Assessment of Taxation would be carried out expeditiously through a team of qualified tax authorities.

Promotion of Rights of Tax Payers- Once the rights achieved through this system is the promotion of taxpayers’ interests. Taxpayers will find it easy to file their tax returns within a period. Through this system, compliance can be met as per the requirements of the Income Tax Act 1961, and the consumer can be free from tax compliance tension. At an institutional level, accountability and transparency of tax are also achieved through transparent taxation.

Technology Driven- Another feature of this system is that more technology is used to make most of the systems faceless. For carrying out this procedure, the government has allocated more than 2/3 of the workforce to work extensively with technology processes.

Major Reforms introduced since 2017

The Government of India has brought out significant reforms in the tax structure present in India. Some reforms are introduced at a union level and some are made at a state level.

The following are the major reforms carried out by the government of India:

• In 2017, the Government brought out the framework for the Goods and Services Tax (GST).
• In 2019, the Government of India reduced the corporate tax level from 30% to 22%. This is one of the significant milestones which affected all forms of manufacturing units.
• Dividend Distribution tax was removed when it comes to the distribution of dividends to shareholders.
• Even there were significant changes to the income tax levied on the personal income of individuals.
• The Income-tax departments, along with the CBDT, have introduced digital technology to improve the filing of income tax assessments.
• The Government even introduced the Vivad Se Vishwas Act, 2020 (Scheme), which expedited the closure of various forms of income tax-related disputes.
• Due to the Covid-19 Pandemic, the Government even brought measures such as digital-based transactions and extended the deadline for submission of tax returns.

By carrying out all these goals, the Income Tax Department has achieved the Prime Minister’s vision to make India Digitised. The introduction of Transparent Taxation would be a significant milestone yet, which can be added to the notable list of significant reforms brought out by the current government.

What are the benefits of transparent taxation to the Income Tax Department?

The following benefits are the benefits of transparent taxation to the IT Department:

• Tax assessment and filing can be carried out faster due to improved technology.
• Cases and disputes can be appealed easily through the online system and mechanism.
• Through this framework, territorial jurisdiction is removed, and only Union Jurisdiction is present. Through this, the Centre and CBDT have all the respective powers.
• The authenticity of tax documentation is possible through the introduction of the Document Identification Number (DIN).
• Artificial Intelligence and Data Analytics introduced through this system can increase the processing time of different applications.

What are the benefits of this system for taxpayers?

The following are the benefits of transparency taxation for taxpayers:

• Transparency, Governance, and Accountability can be achieved through this system.
• Increased Processing time for taxpayers who are filing their income tax and assessments online.
• Taxpayers can seek assistance using this scheme from the online help desk for filing the pre-filled form.
• As this scheme is primarily based on faceless compliance, there will be less contact between the taxpayers and the tax authorities.
• The authenticity of documents and identification is possible through the new system of the Document Identification Number (DIN).

The Transparency Taxation Framework has made ease of access and convenience in tax compliance to both income taxpayers and the respective income tax authorities.

Conclusion