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Income-tax experts and CAs hail common tax filing form proposal

After the overhaul of the income-tax website to make tax-filing easier comes a proposal to have a common ITR form, which will ensure that taxpayers are asked only relevant questions, depending on the nature and level of their income.

November 07, 2022 / 11:33 AM IST

Every year the Central Board of Direct Taxes (CBDT) issues updated Income Tax Return (ITR) forms around the start of the new assessment year i.e., in the month of April. The updated forms are used for the filing of returns on income earned in the previous year or the relevant financial year.

However, on November 1, the CBDT issued a draft common Income-tax Return form to replace the multiple ITR forms currently in use. As many as four ITR Forms (ITR 2, ITR3, ITR5 and ITR6) will be replaced by this form. ITR1 (for salaried persons) and ITR4 (for a presumptive taxation scheme, read here) will coexist as optional forms, while ITR7 (which is usually used by taxpayers classified as public/charitable trusts) will remain unchanged.

The CBDT has requested inputs from stakeholders and the general public on the draft common form, before making it a reality.

Moneycontrol asked industry experts about their thoughts on the common ITR form, whether there was a need for it, and if so how it will help.

Kuldip Kumar, Partner, Vialto Partners India believes that the new form is another valuable initiative by the government in simplifying the compliance burden on taxpayers via optimal use of Artificial Intelligence. The taxpayer will now be relieved from deciding which return form is applicable for the year.

Further, a relook at the return-filing system provides an excellent opportunity for stakeholders to help in further streamlining and improving the ITR form. With the focus on expediting the return filing system, the day is not far when taxpayers will only need to review the ITR form pre-filled by the income tax department, and if no change is made by the given time, it will be deemed to be filed.

Sandeep Sehgal, Partner-Tax, AKM Global is of the view that the common ITR form is a step towards an easier and uncomplicated experience for a taxpayer while filing a tax return, with unrelated information and schedules not being shown during the process.

Sehgal explained that the form has been customised for taxpayers with applicable schedules, based on certain questions answered by the taxpayers. The questions are designed in such a manner and order that if the answer to any question is ‘no’, other questions linked to this question will not be shown.

At present, it takes a lot of time to go through each schedule irrespective of the fact that it could be irrelevant to the taxpayer. This creates confusion and an unnecessary compliance burden. However, incomes of a special nature such as foreign incomes, passthrough incomes, business trust etc shall require special attention.

Deepak Jain, Chief Executive, TaxManager.in pointed out that the Income Tax Authorities keep updating forms on a regular basis to ease the filing process every year for taxpayers.

Introduction of the common ITR forms will help the assessees save time as they will not be required to check out  schedules that are not applicable to them. This proposal is an important step towards being in the league of international best standards when it comes to filing taxes. The common ITR form will not show irrelevant information and some schedules that are rarely used will be dismissed by answering just one question. Examples include transfer pricing and seldom claimed deductions.

Vivek Jalan, Partner, Tax Connect Advisory, a multi-disciplinary consultancy firm, said that, “propelled by the success of implementation of GST”, it seems that the Government is now focussing on easing compliance with the Income Tax Law.

The Income Tax Act is more than 60 years old and almost every clause has been amended over time. Today it has become the most complicated legislation and holds some uncertainty for taxpayers also.

At present the taxpayer is mandatorily required to go through all the schedules, irrespective of whether that particular schedule is applicable or not. This increases the time taken to file ITRs and in turn creates difficulties for taxpayers. The schedules with basic information, such as the name of the taxpayer, address, PAN No. etc as well as the schedules for computation of total income will be applicable to all filers. Certain wizard questions are to be answered by the taxpayer in the beginning and thereafter the form will automatically be customised.  The filer only needs to answer questions that apply to him and fill schedules linked to those questions where the answer has been given as ‘yes’.

"We have already seen the process of automatic cross checking of third-party data in the Annual Information Statement (AIS), which started recently. The proposed common form also contains suitable reconciliation of third-party data available with the Income-tax Department vis-à-vis data to be reported in the ITR. This would be especially important for businesses, which will have to now reconcile all third-party data, including GST Data, Bank Data, Suppliers data, etc and then file their ITR. In case there is any difference, autogenerated notices may be received by the taxpayers.”
Ashwini Kumar Sharma