The new-age tax philosophy of finance ministry is to make minimal changes, bring in ease of paying taxes and reducing the tax rates to optimal level, said Finance secretary Ajay Bhushan Pandey.
Pandey said that “the attempt of the tax department is to make minimal changes in the tax rates, tax administration system and policies for better compliance and bringing ease of paying taxes for the taxpayers.”
He is also of the view that the revenue department is looking at bringing in more predictability in tax rates and tax reforms. “I am of the view that we should not be resorting to changes too often. I feel that tax rates should not be changed more than once in a year. Ultimate aim is to go to a lower optimal rate of tax, be it for income tax or in GST, to enhance tax base and revenues.”
Pandey, who was talking at a FICCI Webinar, also said that it is too early for the tax department to assess how many people opted for the new income tax rates (without rebates) as the filing deadline is yet to come.
The Income Tax Department on February 1, in the Union Budget 2020, had announced a new personal income tax regime by reducing taxes but only for those who choose not to take any rebate or deductions.
On August 13, Prime Minister Narendra Modi had announced the future course of tax assessment and making the entire system faceless for direct taxes.
“I am confident at this particular time that with new faceless system and enhanced information gathering, tax collection will see a significant impact of these two reforms,” Pandey added.
He also said that the department is trying to address the anomaly that in a country of over 130 crore only 7 crore file tax returns.
This was also highlighted by the Prime Minister Narendra Modi as he had expressed concerns over this trend.
“We are trying to address the problem of why only 7 crore people out of 130 crore are filing tax returns. Once those who are not filing tax returns, start filing then the tax base will increase and reduce the burden of taxes on honest tax payers. Now, with more information coming we are now reaching out to non-filers to start filing to avoid adverse action,” Pandey said.
He also added that the department is conscious of the recent concerns that NRIs are facing with the tax administration and the department is open to address their issues.
“There is a thinking to simplify taxation norms for NRIs. This is one area where problems have come to the fore recently. CBDT will have to be more aligned to such problems of NRIs,” Pandey pointed out.
Meanwhile, categorically highlighting the philosophy of the tax department, Pandey said that “the overall purpose of the tax department is to provide ease of living and ease of doing business through ease of paying taxes. All recent tax reforms have a common thread of simplification and reduction of taxes.”
He also said that, “The tax reforms recently announced by the government are aimed at making India globally more competitive on tax rates. Also simplification will lead to very little chance of litigation. Taxation should not be a painful exercise; it should be a painless and fearless exercise and the tax department is very clear that its role is now to be a facilitator for the taxpayers.”
Taking about the merits of faceless and transparent tax regime, Pandey added that “For a common taxpayer we are striving to attempt to give him ease of living, we have moved away from territorial to dynamic jurisdiction. Orders have been passed on more than 11000 cases handling them totally on the faceless platform.”
“There will be a technical and one assessment unit under the system of faceless assessment. Technical unit will share the department’s assessment of the law and how that law has been interpreted by various courts, in some cases the option is available to take clarity at the board level also. In 11,000 cases, which have been dealt through faceless assessment in the first phase which had 58,000 cases, not even in a single case physical hearing was demanded.”
“There has to be a valid ground for demanding a physical hearing and if there is merit then it will be granted. All the legacy appeal cases will be taken up in a faceless manner post 25th September. In the appeal system also we will have a technical team to help assesses know the right interpretation of the law,” he further added.
Pandey also said that the government is taking a lot of measures to broaden the tax base. These include, “Extensive use of data will help in scrutiny and assessment. We are getting lots of information from assesses through new form 26 AS and other information sharing and information gathering platforms. Stock market transactions, mutual fund transactions, foreign remittances data etc will be available in 26AS. These information can be used appropriately by the taxpayer while filing the tax returns. With increasing number of taxpayers, risk parameters have been identified to assess selective returns for scrutiny. Large discrepancies cases are only getting selected for scrutiny.”
Quoting the recent data, Pandey added that “only a quarter of a percent cases are only getting scrutinized. A lot of trust is now being placed on the taxpayers by the tax department.”
On the data sharing and the benefits attached, Pandey added that “recently, sharing of information with GSTN, banks, customs other India agencies and 98 countries abroad. With all these information the tax dept is able to do data assessment and select cases for scrutiny. Complaints of harassment and corruption will also get eliminated. We want a system where honest tax payer doesn’t get harassed even if his case is picked for scrutiny. Even in wrong disclosure of taxes, we want to give a fair chance to the taxpayer to correct his return. “
He also elucidated that the new faceless appeals system will be ready and will begin by 25th September.
To ensure a smooth transition to the faceless regime, “the tax department will closely work to ensure teething troubles are well taken care off. In future, with faceless assessment, fair orders will be issued, leading to less no cases landing up for litigation,” Pandey added.
Talking about other measures taken by the tax department and their success, Pandey added that the tax department can now issue instant PAN cards to those who already have the unique ID or the AAdhar. “Till now, 35 crore PANs have been linked to AADHAR already. With instant PAN allocation facility now been made available, it has also brought in seamless and transparency to next level,” Pandey said.
Pandey says that the department has also “expanded the scope of statement of financial transactions to SEBI, Mutual funds, GST, etc to get more data to the tax department. High value transactions data is being sourced from various agencies and not from the taxpayer. The need for such data is to match the profile of taxpayer with the high value transactions the same taxpayer has undertaken. And all these activities are completely faceless.”
Fiannce secretary has also explained the benefits of GST, saying that according to the data of roads ministry, “Prior to GST, a truck used to move 225 Kms per day and post GST this has got increased to more than 300 kms a day, reflecting the increased efficiency with removing of barriers.”