A record 74 lakh (7.4 million) returns were uploaded on the income tax e-filing portal on Sunday, which is the last date for filing returns on earned income in the financial year 2021-22 for most taxpayers like salaried, professionals and the like. small businesses. In fact, more than 12% of all income tax returns were filed on the last day, as taxpayers and tax professionals scrambled to meet deadlines and avoid penalties for late filing. The Income Tax Act requires all taxpayers who were not required to file their returns by July 31 or get their accounts audited to pay penalty for late filing.
Notably, the highest number of returns were filed in the last 10 days. Of the 5.83 crore (58.3 million) returns uploaded by the deadline, around 3.35 crore (33.5 million) were filed after July 22, when the finance ministry denied any extension of the July 31 deadline. Nevertheless, the total returns uploaded are slightly lower than the 5.89 crore (58.9 million) returns filed till the December 31, 2021 deadline for the financial year 2020-21.
Commendably, there were no complaints of the Income Tax e-filing portal crashing, despite the huge amount of returns being uploaded on the last day. According to the data shared by the Department of Revenue in the Finance Ministry, there were moments when it was accepting 570 returns per second. There were a few glitches in the last few days, which have been fixed immediately. This is in stark contrast to the situation a year ago, when the finance ministry was forced to extend the deadline twice, first to 30 September and then to 31 December, as the tax portal, redeveloped by Infosys Ltd, was plagued with glitches.
The new portal has simplified the process of filing income tax returns, though some forms like ITR-3 are complicated for common taxpayers to navigate on their own. Filing of returns is a simple matter for most taxpayers, especially those with income from salary, interest, dividend and home loan. They have the option of using the pre-filled form, given that most of the income is captured by the tax system through Permanent Account Number (PAN). E-verification of the return using the OTP provided on the Aadhaar linked mobile phone eliminates the need to send a printed acknowledgment of the return to the department, making the entire process of return filing paperless. Until e-verification was introduced a few years back, taxpayers had to print the acknowledgment and post it at the Central Processing Center of the Income Tax Department to complete the process of filing tax returns.
Taxpayers who have filed their returns for the current and previous assessment years may also have realized that the income tax system has become difficult to dodge. The tax department has the information of all financial transactions carried out by the assessees in a financial year, even if those transactions are subject to tax. It can be seen from the Annual Information Statement (AIS) and Taxpayer Information Statement (TIS) that the tax system prepares for every assessee other than Form 26AS.
AIS and TIS were made available on the tax filing portal from the end of 2021. These statements serve many purposes because they are so broad. Taxpayers get information about almost all their financial transactions during a year at one place. AIS also provides information about the amount of tax deducted at source by employers, banks on interest, corporates on dividend etc. This simplifies the task of computing the total income and tax liability. There may be some discrepancy in the statement, which will need to be verified and reconciled. Correctly filing returns is also useful information to avoid disputes with the tax department, as taxpayers know what information the tax department has and what can be demanded. This improves compliance, widens the tax net, reduces instances of under-reporting of income and thus widens the tax net.
Still, the number of people filing tax returns and paying income tax is very small at less than 5% of the population. It can be argued that India has a very young population, a large number are engaged in the low-paid informal sector and most women do not work. Hence the number of people liable to pay taxes on their income is less. But of course, over 5.83 crore people must file tax returns, when around 10.55 crore have registered on the income tax portal.
The tax department is using a variety of tools like artificial intelligence to track financial transactions. The implementation of the Goods and Services Tax which has increased the formalization of the economy and led to more recording of transactions, is another tool that helps to track the flow of money in the economy and identify beneficiaries. The revenue department is now in a position to compare data from different tax databases to identify evasion. The increase in the number of raids by income tax and indirect tax authorities is a result of the use of traditional intelligence such as artificial intelligence with networks of informants.
Is India finally ready to stop tax leakage? Tax dozers can continue to find ways to avoid paying taxes but it will be difficult to outsource the technology consistently. Especially when government means business. No system can be foolproof. But gaming is becoming increasingly difficult and expensive. Over time, real gains in terms of collection should start to materialize. In particular, tax policy reforms, such as the implementation of the long-pending Direct Tax Code, are carried out if necessary.
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