31st July brings trepidation and fear to the hearts of many an honest taxpayer—one suspects that dishonest taxpayers, in any case, are not prone to attacks of conscience. The reason for the trepidation, of course, is that 31st July is the deadline for filing the appropriate income-tax returns (ITRs) by individuals earning income from salary or profession, not subject to audit. One is required not just to pay one’s taxes honestly but also to file a detailed return with huge amounts of information, to enable the central board of direct taxes (CBDT) to verify one’s honest compliance.
The ministers and officials of the Union government are quick to decry the taxpayers’ tendency to wait till the last minute before filing, thus needlessly adding to the system pressure and personal stress. They have a valid point in that human beings everywhere tend to procrastinate ahead and wake up only when something cannot be delayed any longer. Is this the only reason for the last-minute rush to file taxes? Far from it. Irrational and unhelpful regulations of the CBDT play a major part in the last-minute filing.
All taxpayers, and even those with incomes over the base tax limit but not liable to pay tax, are required to file an appropriate return of income for the previous financial year by 31st July of the succeeding financial year. For a change, this year, the CBDT announced the ITR forms as early as April 2022.
Bear in mind that you cannot simply assume that an ITR form used last year is valid and go ahead with your filing. Thanks to ever-changing bureaucratic tinkering in the Union Budget and otherwise, the scope and layout of ITRs change from year to year.
One wonders why CBDT waits till April 2022. After all, the ITR for FY21-22 is impacted primarily by the Budget 2021-22, which is announced on 1 February 2021!
While some changes may be announced after that, there is no reason why CBDT needs to wait until April 2022, leaving just four months before the ITR filing deadline, to announce the appropriate ITR forms to be used.
To make matters worse, while the ITR forms were announced in April 2022, the software utilities for the various ITRs (1 – 7) were released over the next couple of months, and the CBDT kept modifying them from time to time. Some modifications occurred as late as 25 July 2022 – barely a week prior to the filing deadline!
Can one blame a taxpayer for being confused?
Until a couple of years ago, CBDT used to release the utility in MS Excel, which is familiar to many taxpayers. Last year, without a word of explanation, they shifted to a Java-based utility, which baffled taxpayers who struggled to get to grips with it. Why shouldn’t it be mandatory for CBDT to release the utilities by April 2022 at the latest and no modifications thereafter?
In order to file one’s ITR, it is essential to have in possession forms 16A and B issued by the employer. Though the financial year ends on 31 March 2022, and most audits begin around then, CBDT generously permits employers to issue forms 16A and B up to 15 June 2022!
Why give the employer two-and-a-half months to issue a form which merely captures static data about payments and deductions during the year and then insist that the dynamic data be completed by the taxpayer in one-and-a-half months? Why not insist that forms 16A and B be issued by the employer latest by 30 April 2022, giving enough time to the taxpayer?
Even form 26AS, which is essential for the taxpayer to fill in the ITR, is delayed by CBDT. PAN numbers are cited by the employer in deducting taxes by corporates and banks paying interest and dividends. Yet, CBDT is highly lackadaisical in making the completed form 26AS available to taxpayers.
Just as with forms 16A and B, the CBDT kindly permits tax deducted at source (TDS) returns to be filed right up to 31st May of the succeeding financial year, even though all details of TDS should be available well before. TDS in any month is supposed to be deposited by the deductor within seven days of the succeeding calendar month. Thus, all amounts of TDS up to 28th February of the financial year would have had to be deposited by 7th March of the same year.
Only as regards TDS during the month of March the amounts can be deposited as late as 30th April. Why so? Monies by way of TDS are the property of the Union government and there is no reason to allow corporates to enjoy the float as working capital for 30 days.
Since corporates can thus delay their TDS deposit till 30th April, they are kindly allowed time up to 31st May to file the TDS returns. Only after the TDS returns are filed and processed will the form 26AS be updated and available to taxpayers! And it can be quietly updated by the CBDT at any point thereafter without notice to the taxpayer – so one cannot be sure of the final form 26AS till maybe mid-July.
See the disparity, therefore! We keep hearing about taxpayers waiting till the eleventh hour to file their return of income and tax; nothing is ever said about CBDT making critical information available much later than it can or should. The balance of convenience is for the corporates deducting tax and for CBDT itself, not for the harassed taxpayer.
Can we propose a refinement in the system? We, as taxpayers, commit that we will not only file our return of income and tax by 31st July; we will do so well prior to the due date. In return, we ask that :
1. The ITR forms be released by the CBDT at least by 30th June of the relevant fiscal year—any changes after that date to be prominently publicised and explained;
2. The software utilities be released by 30th September of the relevant fiscal year—any changes after that date to be prominently publicised and explained;
3. Forms 16A and B to be issued by the employer by 30th April of the succeeding financial year;
4. Form 26 AS and the AIS/TIS to be issued in final form by the CBDT by 31st May of the succeeding financial year—any changes after that date to be informed to the taxpayer at the time of such modification.
The above timelines will be fair to all concerned, viz., CBDT, employers and taxpayers. Can we please have these from FY22-23, which is AY23-24?
Madam finance minister, you will greatly help honest taxpayers by doing this.
(Artha Shastry is a banker who wishes to remain anonymous.)