New ITR forms - Taxpayers and Experts want Some important Changes
The reaction to the Income Tax Department notifying the new ITR forms for the current assessment year has been outrage. The forms requiring an assessee to furnish extensive financial details have been panned by one and all. Retrospective, intrusive, too complicated, difficult to compile were just some of the adjectives used by taxpayers.
Though the I-T Department is simplifying the forms now, given the focus on curbing black money, disclosures are inevitable. However, some amendments are needed.
The Saral forms were introduced to make tax filing easy for the ordinary taxpayers. The new forms are doing exactly the opposite.
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| New ITR forms - Taxpayers and Experts want Some important Changes |
Sample this. Both residents and non-residents have to provide full details of foreign travel undertaken — passport number, place of issue, countries visited and number of times travelled. Residents have to also declare personal expenses incurred during travel.
Most taxpayers are finding this clause bizarre. A frequent business traveller will have to analyse and sort personal expenses from business expenses. As all expenses are not made through a credit card, it means preserving every single receipt. This has to be done for every trip. "The biggest problem is that the department has not provided a threshold for expenses. There will be small personal expenditures.
The I-T Department expecting taxpayers to keep records of such purchases is unreasonable," says Tapati Ghose, Partner, Deloitte Haskins & Sells LLP. The question is what knowledge is the tax department gaining out of this?
"There is a huge mismatch between the amount of money Indians are spending on foreign travel and what they show as income. The department may be trying to catch this lot of defaulters," says Saakar Yadav, MD, myitreturn.com, a tax-filing portal. However, analysing such data in itself will be a mammoth task.
"Travel within India can cost more than trips abroad. Therefore, the foreign travel spending yardstick is flawed," says Archit Gupta, CEO and co-founder, ClearTax.in.
Moreover, if the intention of the individual is to evade tax, how do you expect to catch him through the self-declaration route? The new ITRs make it mandatory to list bank accounts held at any time during the year, including those that have been closed during the period. Taxpayers will also have to provide account numbers, name of the bank, IFSC code and list any joint holders along with the closing balance on 31 March of the assessment year. While it may not be difficult to collate such information, it is difficult to comprehend the intent of such declaration when every account is attached to the holder's PAN number.
Clarification is needed on the intent of the department asking joint account holders to declare details. "There are joint holders who are present for convenience. They may not be depositing funds or have a taxable income. The department needs to clarify that non-contributing beneficiaries need not mention such accounts in their returns," says Gupta.
At present, a resident individual has to declare the details of foreign bank accounts, financial interest in any entity, details of immovable property or other assets outside India in ITR-2. The new forms require these individuals to also declare the accrued income—interest, returns and rentals—from these assets.
None of the disclosures that have been asked for have a declaration threshold. "Countries that seek such details have a defined asset-value threshold. So if you own anything that values over the limit you need to report it to the tax authorities. The objective should be to have a record of assets and earnings that has a material impact on the individual," says Ghose.
To add to the trouble, the Indian financial year is April to March, which might not match with many countries that follow the calendar year accounting system. "The tax department is asking for accrued incomes till 31 March. You cannot expect an individual to furnish details about a bank account outside India in the middle of the financial year," says Ghose. Till now, taxpayers calculated this tax liability on approximations. However, if the I-T department asks for actual figures, it will be difficult for an individual to produce the numbers.
All is not bad
Some steps are in the right direction. In the current form, there is scope of income escaping the tax net and leaks need to be plugged.
For instance, the need to declare utilisation details of amounts deposited in capital gains account schemes for the year. Since the timeframe for utilising the funds in capital gains accounts to get tax exemptions is long (3 years), many miss out on capturing this data properly in their returns. The intent might not be to escape tax.
Most are unaware. "The department is simply trying to make sure that your calculations are correct. Therefore, an honest taxpayer should not hesitate to provide this detail," says Sudhir Kaushik, CFO and Co-founder, Taxspanner.
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