With less than a fortnight left for the tax-filing deadline of July 31, 2019, chartered accountant associations have voiced out the hardships in filing tax returns due to concurrent changes in the utility to file returns and additional information being asked on long-term capital gains tax, as late as July 11, 2019.
Without asking for an extension of deadline for filing tax returns, the Bombay Chartered Accountant Society (BCAS) – the oldest voluntary body of Chartered Accountants in India – in a letter to the Finance Minister, a copy of which is available with moneycontrol.com, has asked for a solution to “peacefully file the tax returns,” enumerating the chronology of form introductions and changes made to the utility.
To be sure, the utility is a sort of a program based on Microsoft Excel that is downloadable from the Central Board of Direct Taxes’ website. It is a form that you fill while preparing your income – tax returns. As you fill your details, the rest of the fields in the form get updated to arrive at the final tax figure that you need to pay.
As of Wednesday morning, other associations of chartered accountants in Ahmedabad, Surat, Lucknow and Karnataka too were planning to reach out to the Finance Ministry over the adversities of having to reach out to clients for additional information, frequent software updation, which sometimes happens mid-way as they prepare the tax returns.
“Constant tinkering with the forms necessitates changes in software on the e-filing portal; this in turn leads to delays in making the government utility available to tax payers…The pain that is now being faced is beyond tolerance levels…,” states the letter of BCAS to FM Nirmala Sitharaman.
ISIN required to claim capital gains exemption
Mentioning the additional details of ISIN (International Securities Identification Number, a 12-digit alphanumeric number that is assigned to every security) number being asked for a security where the tax-payer books long-term capital gains, BCAS wrote in the letter, “...once the ITR forms are notified, how can such changes be made to the utility and new fields be added without going through the due process of law of notifying the amendments.”
Within hours of the letter being sent, a clarification was issued from the Central Board of Direct Taxes late on Tuesday evening. It states, “It is further clarified that the updating of utility does not hamper filing of return as the taxpayers are allowed to file using the utility which is available at that point of time. For example, more than 85 lakh taxpayers have filed returns in ITR-1 till date by using the said utility, which has also undergone update later.”
In simple words, CBDT says that if tax-payers have already filed their income-tax returns using form ITR-1, and then the utility of, say, ITR-1 undergoes a change, those who have already filed ITR-1 are not required to file it again.
CBDT also revealed that 1.38 crore tax payers had already filed their returns.
But chartered accountants point out that these could be returns of taxpayers who had no income from long-term capital gains. It could be just other income such as bank account interest, dividend etc.
However, Ameet Patel, chairman of the taxation committee of BCAS points out to us that there have been cases where returns that were filed some time ago didn’t quite go through the income-tax e-filing system due to the presence of “a bug.”
He adds: “We have clarified it from the Central Processing Centre representative, who confided that the utility had a bug and was not accepting the long-term capital loss. Finally, when the utility was corrected on July 11, 2019, they asked for additional information to be added for claiming long-term capital gains by stating the ISIN number. So, the returns that were stuck due to the bug, now need to be re-filed with the required ISIN numbers. Unfortunately, many tax-payers do not have the various ISIN numbers handy.”
“Though it is good that the income tax department is receptive to the feedback of tax filers, but these steps need to be well thought out before notifying the forms in April," he says.
Elucidating the difficulty faced by the tax payers and tax professionals, Raju Shah, former chairman of legal representation committee of CA Association of Ahmedabad said, “The client gets irritated when I ask for more information long after he has sent all the requisite information to us. Around 60 returns that were almost processed otherwise at our end are now stuck due to this additional input of ISIN number being requested in the ITR form for claiming LTCG (tax exemption) on listed equity and equity mutual funds.
Delays in Form 16s for salaried class
Usually, chartered accountants are done with filing salaried class returns by June. However, this year, the changes made to Form 16 and extension in filing TDS returns have ensured that several employees received Form 16, as late as July 10, 2019. “We couldn’t file returns in May-June as forms were notified late and salaried individuals didn’t receive their Form 16. In July, when we move over to business tax payers, we are still getting salaried individuals returns,” says Shah.
In fact, tax filing aggregators are inundated with calls asking whether the returns that have been filed are valid, as they are hearing about several changes being made to the utility. “Those who have filed returns with us are revisiting us to check whether they need to file the returns again,” recalls Sudhir Kaushik, co-founder of TaxSpanner.com.
To give solace to those who have already filed the returns, CBDT has clarified that “Even though the utility is being updated regularly to provide ease to taxpayers, returns filed by using the previous version of the utility will continue to be valid.
Clearly, the government’s agenda is to widen the tax net as much as possible and improve tax compliance. But is there a better way to widen the tax net?
Chartered accountants certainly feel so. “Though the changes brought out are progressive and aimed at the overall goal of reducing tax evasion and increasing collection of taxes, the Income Tax Department needs to incorporate these changes in their overall advertisements. This is because, though chartered accountants spend time studying the changes and keeping up with the pace of the changes, the awareness among individual tax payers is lacking. They feel oppressed by the additional information we go and ask them. For them the moto is timely return filing to save the penalty of Rs 5,000 for late filing. The mindset of the taxpayers needs to be prepared to help us with the additional information within a short time span,” Kaushik adds.
Instead of forcing people to adopt new things and taking it for granted that they would follow suit, the overall policy of return forms needs to be well thought out after the Budget and before the introduction of tax return forms by March 31 each year, suggests another chartered accountant, who did not wish to be named.
Whether the tax-filing deadline would be extended or not remains to be seen; however, chartered accountants have a schedule to follow all through the year as there are tax audits, goods and service tax (GST) returns to be filed after the individual returns, and so on.
“…every time a due date is extended, it has a cascading effect and impacts the entire year’s calendar as there are due dates coming almost every month,” mentions the BCAS letter.