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Transparent Taxation – Honoring The Honest


  • In a bid to reward the taxpaying citizens of India, the government on 13th August, 2020, launched a new platform ‘Transparent Taxation – Honoring the Honest’, to honour the honest taxpayers of the country.

Aim

  • To ease compliance by making the tax system, “People-Centric & Public Friendly” and issue refunds faster to benefit honest taxpayers in the midst of coronavirus (COVID-19) pandemic.

Need

  • The number of taxpayers is significantly low with only 1.5 Crore paying taxes in a country of 130 Crore people.

Background

  • It is to be noted that the new scheme, Transparent Taxation – Honouring the Honest is an extension of E-assessment scheme- 2019 launched by Government of India in September 2019.

Key Features

Faceless Assessment

  • It aims to eliminate the interface between the taxpayer and the Income Tax Department.
  • There will be no need for the taxpayer to visit the income tax office or the officer.
  • The selection of a taxpayer is possible through systems using analytics and Artificial Intelligence.
  • The system abolishes territorial jurisdiction.
  • A taxpayer may belong to a particular city but the assessment order, review and the finalisation will take place in different cities.

Faceless Appeal

  • Under the system, appeals will be randomly allotted to any officer in the country.The identity of the officer deciding the appeal will remain unknown.
  • The taxpayer will also not be required to visit the income tax office or the officer and the appellate decision will be team-based and reviewed.
  • The appellate decision will be team-based and the appeals will be reviewed.
  • Exceptions:The benefits of Faceless Tax Assessment and Appeals do not apply to cases relating to:
  • Serious frauds
  • Major Tax Evasions
  • Sensitive & Search Matters
  • International Tax
  • Black Money Act & Benami Property

 

Taxpayer Charter

  • It outlines the rights and responsibilities of both tax officers and taxpayers.

 

Implementation

  • Faceless Assessment and Taxpayer’s Charter is implemented with immediate effect; the Faceless Appeal will be effective from 25th September 2020.

Impact

  • Strengthening Tax System: The platform will add strength to the government’s efforts of reforming and simplifying the tax system. It will benefit several honest tax payers, whose hard work powers national progress. It will also give a big push to a seamless, faceless, and paperless administration.
  • More Transparency:The launch will initiate major tax reforms aimed at bringing transparency in income tax systems, easing the tax compliance and also rewarding honest taxpayers amid the coronavirus crisis.
  • Nation Building:The honest taxpayers of the country play a very big role in nation-building. When the life of the country's honest taxpayers becomes easier, the country also develops, the country also moves forward.Further, this would help in achieving the goal of a Self - Reliant India, AtmaNirbharBharat.

Recent Tax Reforms

  • With a view to providing for the resolution of pending tax disputes the IT Department also brought out the Direct Tax “Vivad se Vishwas Act, 2020” under which declarations for settling disputes are being filed currently.
  • In March, 2020, the Dividend distribution Tax was also abolished.
  • Document Identification Number (DIN) was introduced wherein every communication of the Department would carry a computer-generated unique document identification number, bringing more transparency in official communication.
  • In September, 2019, the Corporate Tax rates were reduced from 30 percent to 22 percent and for new manufacturing units the rates were reduced to 15 percent.
  • The tax slabs have also been rationalised as a part of the ongoing reforms where there is zero tax upto an income of 5 lakh rupees, while the tax rate has reduced in the remaining slabs too.
  • To effectively reduce taxpayer grievances / litigation, the monetary thresholds for filing of departmental appeals in various appellate Courts have been raised.

 

Issues Involved

  • In the newly announced system, serious frauds, major tax evasion, sensitive and search mattershave been kept out of the ambit of the faceless appeals .
  • Further, italso excludes international taxation and Black Money Act as well as the Benami Property Act.
  • Moreover, Tax officials are pushing back against the new faceless tax assessment program. They see problems in the lack of consultation and inadequate resource to implement the changes.
  • According to them, faceless tax assessment may reduce tax collection, which in turn mayraise pressure on officers to meet lofty tax targets for the current fiscal year.

Way Forward

  • India's tax administration has been known for tax harassment, where overzealous well-intentioned officials while raising tax revenues, have dampened growth and at times done more damage than good.
  • The issue of alleged tax harassment by officers gained much attention in India after VG Siddharta, the founder of India's largest coffee shop chain, committed suicide in July, 2019 and left behind a note accusing tax authorities of persecuting him.
  • The launch of the platform is a landmark decision and carries forward the journey of direct tax reforms, following the several measures that have been taken by the CBDT to aid taxpayers.