How to make filing income tax returns easier

Taxpayers might face several issues while filing returns this year.

A vacation to an exotic foreign destination could become stressful, if you are busy collecting bills to show as expenditure while filing income tax (I-T) returns, instead of unwinding and enjoying yourself.

This could soon be the predicament of every citizen leaving Indian shores.

The new income tax return (ITR) form, ironically called Sahaj (meaning easy), asks for details that could make filing tax returns a headache.

Here are a few changes that could make the form - currently under review - easier to fill:

Exempt business travellers, expats

In most developed economies and prominent emerging ones, taxpayers are not asked to funish details of foreign travel, unless the revenue department has taken up the case for audit and found irregularities.

Experts claim data is already available with the governments and is used by the revenue departments.

If the government still wants the information, it should at least exempt business travellers and foreigners working in India from it.

"Employees of information technology companies and export businesses frequently travel abroad. It will be cumbersome for them to maintain a log of out-of-pocket expenses and the money the company has paid for the travel," said Amarpal Chadha, partner, tax and Regulatory, EY.

Expatriates regularly visit home. Accounting for details such as gifts they carried for relatives or a new car they purchased can be cumbersome.

Experts are not sure if the expenses they incur to paint their house or for a plumbing job in their home country should be included either.

Taxpayers on personal trips should be the only ones asked to provide detailed information, claim experts. The government could also introduce a slab - say, Rs 3 lakh - beyond which the traveller has to furnish information for spending.

"It should also be for approximate amounts as it is impossible to keep track of every penny spent," said Chadha.

Too many details unnecessary

The new ITR form wants the taxpayer concerned to not only declare bank account number and branch address but also demands information such as IFSC code, details of joint account holders and account balance as of March 31.

It also asks the taxpayers to furnish similar details on accounts closed during the year.

Bank account details are linked to the PAN card. I-T department can run a query and get most of the information they need.

"That's why people are questioning if the extra information will create any incremental value or it's just procedural compliance," said Suresh Surana, founder, RSM Astute Consulting Group, an accounting and auditing firm.

He suggested the ITR could simply ask for bank account number, name of the bank and branch address. If officers want more details in any particular case, they can always ask for it.

Kuldip Kumar, leader, personal tax, PricewaterhouseCoopers India, who also met Finance Minister Arun Jaitley on behalf of the industry, said there was no clarity on dormant bank accounts.

"If a person doesn't disclose details, there is no provision for it. If the account is activated later, the officer scrutinising the paper can claim the information was deliberately withheld," said Kumar.

We are taxpayers, not experts

Experts claim that those who work abroad and not classified as non-resident Indians would not be able to fill the new ITR without help from a professional.

Looking at the questions, it feels that the taxpayer needs to be aware of Indian tax laws as well as the Double Taxation Avoidance Agreements (DTAAs).

Surana said that the form asks the taxpayer to mention the DTAA article under which they are claiming exemption and the corresponding rate of tax they would have paid in India for that income. "Such information is for mere academic use."

The government also needs to get rid of redundant questions. Tax consultants point out that there is repetition of disclosures the I-T department is seeking in various schedules.

For example, a person would need to declare the interest earned from a foreign bank account in the income statement and again in the section which deals with foreign assets.

It happens only in India

India is not a unique case seeking stringent disclosures but it is among the few that seeking too many details.

Jiger Saiya, partner, BDO India, said Australia, China and the US require similar or more stringent disclosures on assets and income sources abroad.

Take the example of the Foreign Account Tax Compliance Act in the US. It imposes obligation on financial institutions and intermediaries around the world to disclose information on their clients who are US citizens or tax residents.

Singapore, on the other hand, has more liberal policies. They don't tax income residents earned outside the country.
While the UK is strict with its citizens when it comes to disclosure, expats don't need to declare their global assets.

Follow, but not selectively

Experts claim though India is trying to implement best global practices, the government should first put in the systems and processes that are on a par with those countries.

The government should introduce data privacy laws and systems while asking for information that even spouses may not be aware of. The US is way ahead.

Chadha has a point. In 2013, CA students hacked into I-T accounts of actors Shah Rukh Khan and Salman Khan, cricketers Sachin Tendulkar and M S Dhoni, and industrialist Anil Ambani.

Divya Baweja, partner, Deloitte Haskins & Sells, suggested the government strengthen its Annual Information Return report system to track defaulters and those with unaccountable money. US Internal Revenue Service has such a system to track its citizens' financial transactions.