During the previous government’s regime, there was a lot of talk about tax
terrorism. And this government had vowed to end this. But have things really changed?
Let’s look at some positives since 2014. The limit for deduction under section 80C has been increased from Rs 100,000 to 150,000, and the limit for deduction of interest payment on loan taken for a self-occupied house was increased from Rs 150,000 to Rs 200,000. The tax
rate for the slab between Rs 250,000 to Rs 500,000 has been brought down from 10 per cent to 5 per cent. In addition, some tinkering has been done with the National Pension Scheme to bring it closer to the tax
status of Employee Provident fund.
Some good changes have also happened on the tax administration front refunds below Rs 50,000 are processed really fast. Many people who filed their returns in July 2018 and had minor refunds have already been received them. Also, the first baby steps on grievance redressal through the e-filing route seem to have been taken. Today, if there is a delay in a rectification requested by you, filing a grievance online through your own e-filing login does seem to spur the officer to do the work most of the time.
But there is where the good part ends. There has been a lot of noise on the so-called jurisdiction free assessments which is currently mostly fiction than fact. Currently, the department is still struggling to do electronic assessments with the same assessing officers.
The tax terrorism has hardly come down. And the reason stays same – absurd and impossible targets given to tax officers. This is December-end, and a lot of taxpayers are being hit by obscenely high-pitched income tax assessment orders. In some cases, the incomes being assessed are at many 100 to1,000 times of the returned income. And these are not additions due to black money unearthed, but additions made to returned income mostly on absurd legal grounds, which are unlikely to stick in higher appeals.
But the interest of the tax department seems to get the taxpayer to cough up 20 per cent of this absurd demand before he/she can file appeals. The department knows that most of this demand will be reversed in appeals (especially when it reaches the income tax tribunal), but that will happen many years later. In the meantime, the current officer would have met his target, and the refund would be some other officer’s problem.
The tax department has even incentivised the first appeal process (CIT – appeals) to enhance assessments and effectively work as revenue officers, rather than judicial officers that they are supposed to be. But the most disappointing part has been the inability in unearthing concealed incomes on a scale that can be described as large. In addition, there is a complete violation of privacy in terms of the increasingly intrusive data that is required in every new version of the income tax return forms. The demonetisation measure that was supposed to unmask the people with concealed incomes has completely failed to create a dent on black money.
To end with a personal anecdote. In 2007, when the payment of tax was still made manually and through select branches of some public sector banks, a company founded by me made a routine payment of tax (running into a few lakhs) deducted by the company at source at a PSU bank branch.
The cheque was duly debited to the company’s account at the private sector bank, and the challan for the tax was collected by the company from the PSU bank. When I logged into the tax e-filing login of the company recently, I found that this amount was displayed as arrears for 11 years. The amount due had ballooned to double-digit lakhs due to interest charged on this ‘unpaid’ amount. When we contacted the tax deductible at source (TDS) section in the tax department, they told us that this payment was not reflecting in their systems, and hence, the demand.
Luckily, we could locate the original receipted challans as well as bank statements showing the debit in our account. We sent these documents to the TDS department and thought that we would be given credit. But the TDS officer was sympathetic but helpless. He was under instructions to meet his targets at any cost. He asked us to approach the PSU bank and get them to rectify the ‘error’. The PSU bank, on its part, has claimed it does not have the 10-year old data. We may have no choice but to file a writ petition in court. This will probably cost the company the same amount of money as it had already originally paid.
I rest my case on the unfair approach of the income tax department. As they say — the more things change, the more they remain the same. Or, sometimes, it can get worse.
The good: Rationalisation of taxes
Section 80C limit increased from Rs 100,000 to Rs 150,000
Limit for deduction of interest payment on a loan for a self-occupied house hiked from Rs 150,000 to Rs 200,000
The tax rate for the slab between Rs 250,000 to Rs 500,000 brought down from 10 per cent to 5 per cent.
The bad: Tax terrorism continues
Officers continue to get high targets
Consequently, they raise absurd demands on legal grounds despite knowing they will be reversed
The tax department is struggling to do the jurisdiction-free electronic assessments
The writer is a Sebi-registered investment advisor