Pre-filling of Income-tax Returns: Good move or bad?

Pre-filling of Income-tax Returns Good or bad

Published: July 6, 2019 at 10:16 am

Last Updated on

The finance ministry wants pre-filled income tax returns from AY 2020-201 onwards as announced in the budget yesterday. At first sight, this is appealing and convenient, but will it result in a host of new problems?

The finance minister in her budget speech said, “Pre-filled tax returns will be made available to taxpayers which will contain details of salary income, capital gains from securities, bank interests, and dividends etc. and tax deductions. Information regarding these incomes will be collected from the concerned sources such as Banks, Stock exchanges, mutual funds, EPFO, State Registration Departments etc. This will not only significantly reduce the time taken to file a tax return but will also ensure the accuracy of reporting of income and taxes”.

Existing provisions of section 285BA of the IT Act will be modified to accommodate the new agencies for furnishing financial transactions.

The good part is that it will reduce tax evasion. Many who did not report capitals gains will be forced to do so now. The bad part is, we will now have to deal with form 16 like reports from stock exchanges, mutual funds, EPFO, NPS (?) etc. This is nothing short of a nightmare as these could often have errors.

just the lone form 16 from the employer is often a pain to deal with. Remember the mismatch notices two FYs ago? This year we have the delay in generating F-16. I think the IT department should first correct what it can first and then worry about pre-filled returns.

For instance, it should first get rid of Excel and Java utilities and have an online-only return filing procedure. No ITR1, or 2 or 3 or 4 business. There should only be one form with step by step or stage by stage inputs set up with future inputs changing as per past inputs.

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Then existing capital gains statements should be  made easy to understand for first time users.  Otherwise, no one will bother to check the numbers (unless they are seriously off).  We could then graduate to pre-filled IT returns.

This will require data from so many agencies that invariably the deadline for filing will be extended each year! Pre-filing is a step in the right direction, however, all institutions have to be in step for this to work. I have my doubts, but hope I am proven wrong.

What do you think? Also, check out why I think it is not a bad budget

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  1. This is the stupidest move and if implemented it will a night mare for the tax payers. The Finance Minister and her team has no knowledge or experience in the tax filing or they act as though everything is normal and fine. Till now the prefilling of ITR forms is not enabled for ITR2, ITR3, ITR5, etc. Till last year if I click the prefill button it will ask me to login with my Pan NO and everything will be prefilled. This year I have to download in XML format and load in the utility. The last date for the employer to give Form 16 is Jul10, but no extension is given to the tax payers. India is the only country the honest tax payer is treated worse than shit. You see the Income Tax E filing website. “1.Pre-filling of ITR is only for the taxpayer’s convenience. Taxpayers should verify the pre-filled data carefully and add any other taxable income which is not pre-filled.
    2.Last date for filing of TDS statement and issue of TDS certificate by Deductor is 30th June, 2019 and 10th July, 2019 respectively. In case the TDS data is not pre-filled, taxpayers are expected to fill these details themselves. ”
    The income tax department does not have any responsibility even if there are mistakes in the XML downloaded. Even if TDS data is prefilled the tax payer is supposed to fill up the details. If so why IT dept is having chairman and highly paid officials. This is the arrogance of IT dept. I consider IT dept is the least arrogant of all Tax Depts.
    Prefilling of capital gains etc.
    Capital Gain has different meanings depending upon the tax payer. How the NSE or BSE will know my purchase price or my sale price. Capital Gains are FIFO basis. I might buy in 2015 and sell in 2020. How my capital gains will be prefilled. Now what NSE or BSE is reporting to IT dept is the total turnover every day transaction. For FNO the also the NSE reports the total turnover. If I buy one lot of INFY 1200 shares for 500 and sell the same at 500 my FNO turnover is reported as 12 Lacs. Actually as per ICAI guidelines my turnover is 0. So many scrutiny assessments are made by ITO, as they do not have any knowledge of FNO. Even ICAI is ignorant. For them turnover is the total of all positive and negative net amounts. If I buy at 500 and sell at 490, my loss is 12000, but this 12000 is considered as turnover. Is it not stupid. If Modi is having even an iota of making doing business easy let him send bureaucrats to Singapore and Hongkong. Both are having prefilled IT return for last 25 years. I can fill my IT return in 5 mts. I was a PR of Singapore for 23 years. I know how easy file IT returns and GST returns for companies and individuals. We only talk of making business easy. We make doing things as difficult as possible. I have dealt with the Inland revenue Authority of Singapore as Finance Controller. It is Limited Company. They are only paid a percentage of tax collected as their fees. With that they have to pay salaries etc. In singapore there is no concept of AY wise tax receipt and payment as far as the tax payer is concerned. For the tax payer it is running account. There is no TDS for residents. The TDS is only applicable to non residents. There is no tax on capital gains either on shares or immovable property. Capital Gains is taxed only for people whose business buying and selling. For an individual whose buys shares and sells occassionaly there is capital gains. Same for house. There is no tax on Bank interest. According to them tax on capital gains and bank interest are not value addition. It is a zero sum game where one person is gainewr and another is a loser. No wonder all the startups in India are going to Singapore. We only talk about India’s potential, but we will never realise. I feel sad for this country and feel sadder for relocating to India.

  2. Regarding Pre-Filled I T R Forms , ig does not appear to be sound , as
    it is difficult to know how far the filled in figurws are correct , and
    what figures are missed ; I HAD EARLIER SUGESTED ( In Connection
    With Avoiding Black Money ) That All The Concerned ( Banks ,
    Nationalised And Private ) , N B F Cs , Private Companies . Government
    Companies etc. whoever are paying interest on the individuals investment
    ( FDs etc. ) , should be asked to SHOW In 26 – AS Statement of all
    individuals , irrespective of the fact whether there is any T D S is
    recovered or not , MANDATORY , And Individuals should be asked to
    First See The 26 – AS Statement , and then should themselves file
    their I T R ( if necessary with the help of CAs etc. ) ; this way , nobody
    will avoid to mention any income in the I T R . This Will help all concerned including the I.T. Department to cross veridfy .
    on the same

  3. I am sorry to use the word “pathetic” when it comes to Capital Gains statement from mutual funds.
    They furnish “profit and loss “statement when asked for CG statement.
    A leading mutual fund has given the statement without accounting for grandfathering.
    The demat account also contains funds bought in folios and transferred to demat account subsequently. I such cases the “PnL statement” will not include such funds when sold from demat account since cannot vouch for purchase price.
    I have in my possession regret letter from my fund when I pointed some of the lapses.

    1. CAMS & Karvy provide grandfathering with their CG stmt. All MF except Franklin & Sundaram are serviced by either cams or karvy. So, which AMC hasn’t implemented this change.

  4. Definitely this one question always haunted… When you have PAN everywhere and now AADHAAR almost everywhere, why cant the ITR form pre-fill.

    Every year people like me who has 3 bank accounts, mutual funds invested across platforms (Funds India and later Invezta) have to spend lot of efforts just to find out how much we owe as a tax..

    This should be auto-filled. Yeah, it may be error-prone in the initial years.. But, they should do this one by one… For example, on year 1, pre-fill Salary & Bank incomes.. and gradually increase to everything pre-filled.

  5. – In the USA, every institution which pays money to people officially has to (1) report it to Internal Revenue Service (IRS which is equivalent of Income Tax department in India) in the prescribed format and (2) provide a statement to the party in the prescribed format. Same for salary. During the tax filing time, the individual has to pick up the respective “number” from the respective “box” from the “respective” form in the Income Tax form. A person with basic common sense would be able to do that since the Income Tax form is simple.

    – The good part in India is that the Income Tax department in India is providing the Tax Filing software (Excel and Java Utility) free. What needs to be done is the forms and respectively the software needs to be made lot simpler. For example, I had filed ITR-2 and when taking printout for my records it prints a 40 page document with more than 50%-70% of the pages with 0 values; how good is that. The irony is that we are the IT capital of the world.

    – The Income Tax department officials have to be sanitized and sensitized from the top to bottom. Most of them are still arrogant. Out of my past 10 years IT returns, 5-6 of them are pending with IT Assessment officer even though I had filed the IT returns electronically. The issue is very simple. I had invested few FDs in my wife’s name, TDS was deducted for those and reported in her Form-26AS and I have reported the income & TDS in my tax returns using Clubbing of Income provision. In my income tax returns processing, the reported income has been considered but not the TDS (since it’s reported against my wife’s PAN). In my IT demand, those TDS are showing as exception. When I reported in grievance cell, they are closed with resolution to fix it in my Form 26AS. Now, how can the TDS deducted against my wife’s PAN can be reported in my Form 26AS. I have tried couple of times in the grievance cell to fix this and every time the resolution is either one of (1) Please fix your 26AS by working with the respective organization, (2) ITR transferred to your Assessment Officer, (3) Send your IT form (hello, you have already processed it and you want to send this to you again ???), (4) Grievance Closed without any reason.

    So, as we all know, the government is trying to kill the geese laying golden eggs – honest tax payers. The dishonest ones which form the major part keeps evading which is where the government has to go big time; but, alas I don’t know why they don’t. And most importantly the cash dealing ones – professionals, real estate – because that transaction never gets into the financial system to be reported by anyone and assessed by anyone.

    The simple Key Performance Indicator which I would suggest for the IT department for them to track as a GOAL is how many tax payers they are bringing into their net every year (not IT filers).

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