Streamlining the Tax Filing Process: The Advancement of Automatic E-Filing for Income Tax Returns in India
The Indian government is pushing forward with innovative solutions to simplify the tax filing process, with the goal of automating the e-filing of Income Tax Returns (ITR) through the linking of various sources of income to the Permanent Account Number (PAN) system. This initiative marks a significant step towards making the tax filing process more efficient and accessible.
Current Status of PAN Linkage with Salary-Related Income
As of the current fiscal year, the Indian government has successfully linked PAN with salary-related income sources, a key milestone in the broader plan to automate the filing process. This linkage allows for the automatic insertion of data related to salaries into the return form, greatly reducing the need for manual entry. This process, termed owning data, enables taxpayers to receive pre-filled ITR forms, a feature that aims to enhance efficiency and reduce errors.
The government is currently focused on extending this model to other sources of income, such as business income, property income, and capital gains. By connecting these additional sources of income to PAN, the government hopes to eliminate the need for manual data entry, thereby streamlining the tax filing process for millions of Indians.
Upcoming Features: Transaction-Based Return and Pre-filled IT Returns
Starting from the assessment year 2020-21, the Central Processing Centre (CPC) will generate transaction-based returns. These returns will require taxpayers to explain the transactions to the CPC by the due date for filing. This system aims to provide more accurate and transparent tax returns, helping to reduce the margin of error and ensure compliance.
Furthermore, the government has initiated work to pre-fill ITR forms using general data such as names, PAN numbers, and addresses. This data can be sourced from previous ITR forms or recent updates in the PAN and address databases. However, due to the variability of other data sources (e.g., income from capital gains, dividends, and rental income), a degree of manual verification will still be required. This is a complex process, and data accumulation and verification are only done post-ITR processing.
Awareness of System Limitations
While the government is making significant strides towards automating the tax filing process, it is important to note that income streams are inherently complex, and not all sources of income can be captured by the system in the near future. Therefore, it is crucial that taxpayers are aware that automatic e-filing does not completely eliminate the need for thorough review and potential editing of the auto-filled forms.
The government is actively working towards making the e-filing process more robust. In the near future, they plan to launch ITR e-assessment, a system designed to further streamline the process. However, it is still in its nascent stages, and continuous improvements are expected over time.
Conclusion
India's journey towards automatic e-filing of ITR is well underway, with significant progress being made through the linking of various sources of income to PAN. While there are challenges and limitations to the system, the government's commitment to automation signifies a step towards a more efficient and user-friendly tax filing process. As technology continues to advance, we can expect further enhancements that will ultimately make tax filing more accessible and seamless for Indian taxpayers.