Massive changes are underway for the way tax returns have been filed till date. It is the era of pre-filled tax returns.
The 2019 Union Budget had several announcements that aimed to simplify tax laws and administration. The Finance Minister pointed out that India’s Ease of Doing Business ranking under the category “Paying Taxes” improved significantly in the last two years. And on that note, she highlighted the importance of leveraging technology to make compliance easier for the taxpaying public. With this purpose in the agenda, measures like the interchangeability of PAN and Aadhaar, Faceless e-assessment and pre-filing of income tax returns were declared.
The FM confirmed in her budget speech that pre-filing of income tax returns would be made available to taxpayers. It will contain details of the taxpayer’s salary income, capital gains from securities, bank interest, dividend income, tax deductions etc. The information regarding these categories will be collected from sources such as state registration departments, Provident Fund records, mutual funds, Stock exchanges and banks.
Preparing for automated return filing
Apart from reducing the time required to file a return, automation will also ensure accuracy of data. The linking of PAN with most financial transactions has made it easier for the income tax server to pull out the data from multiple sources. The linking of Aadhaar has also made financial transactions more interlinked. The income tax department had started offering pre-filed Income tax returns for taxpayers who are eligible to e-file ITR-1.
The Central Board of Direct Taxes had revised the format of Form 16 and Form 24Q, facilitating the collection of information by the income tax department. The income tax department also advised the taxpayers to verify all information in the forms, particularly the pre-filled ones, before submitting the same for assessment. Salaried taxpayers will have the dependency of Form-16, and the last date for issuance of the form to employees has been extended to the 10th of July by the CBDT.
The taxpayer has to keep in mind that pre-filled information is available only if they are filing ITR-1 or ITR-4 online using the department’s e-filing web portal. It will, of course, have no pre-filled information if the form is downloaded, filled in excel or Java format and uploaded. ITR-1 is filed by residents having a total income of not more than Rs. 50 lakhs. The only income sources allowed here are salary, one house property, other source and agricultural income up to Rs. 5,000. On the other hand, ITR-4 is applicable for resident individuals, Hindu Undivided Families (HUFs) and firms who have a total income of up to Rs. 50 lakh and have chosen to file their income under the presumptive taxation scheme (PTS).
Globally, pre-filled tax returns are gaining popularity and acceptance. CBDT’s initiative to implement Online Tax Accounting and TDS System can be considered as an important milestone paving the way for auto-population of tax returns. E-filing of income tax returns are done using the income tax department’s e-filing web portal: www.incometaxindiaefiling.gov.in
Have a look at Union Budget 2019 – Key Highlights to understand the important announcements made during the Budget 2019 and how they will affect taxpayers.