How ITR Filing Process Has Evolved In Last 10 Years

The most important change in the development of e-filing in the country is the refunds, say tax experts.

How ITR Filing Process Has Evolved In Last 10 Years

The Income Tax Department has taken a series of steps over the past few years for simplifying the ITR filing process. From the launch of a separate portal for the online filing of income tax returns to the simplification of forms, the gamut of changes in the income tax system has enabled the assessee to complete the filing process within minutes.

"Today, the small taxpayer can complete, submit and verify the income tax returns within 5-10 minutes in an easy process," says Naveen Wadhwa, DGM at Taxmann.com. 

The IT department has also made it mandatory for individual assessees, with the exception of senior citizens, to file their income tax returns online.

Meanwhile, the number of returns filed online has increased multi-fold, surging more than seven times to 6.68 crore in financial year 2018-19, from 90.5 lakh in financial year 2011.

Here's a summary of key changes in the simplification of ITR filing process in 2010s:

Launched in 2006 as a pilot project, the e-filing system was developed and expanded to individual assessees over the years.

Aimed at enabling the taxpayer to submit documents to the authorities through the internet or direct connection, the e-filing scheme has benefited the taxpayer and Income Tax Department alike, according to tax experts.

Some of the key benefits of the e-filing project include the removal of time and place constaints - the returns can be filed from anywhere, anywhere, faster processing of return and the issue of refunds, and easy excess of past data online, Ashok Shah, partner at NA Shah Associates, told NDTV.

Introduced in September 2004 on a voluntary basis, the e-filing of income returns was made mandatory from financial year 2006-07 for companies and other taxpayers whose accounts were required to be audited.

From financial year 2010-11, the Income Tax Department introduced two simpler income tax return forms for individual taxpayers. While the form ITR-1 (Sahaj) was meant for salaried individuals, the form ITR-4S (Sugam) was interned for small business taxpayers falling within the presumptive taxation category.

The taxman subsequently took a number of measures towards efficient tax administration, including an online facility for taxpayers to track the status of refunds and credit for prepaid taxes.

In financial year 2011-12, the taxman launched TRACES or TDS Reconciliation, Accounting and Correction Enabling System to serve as an integrated one-stop platform to facilitate TDS operations.

In financial year 2012-13, the taxman made it compulsory for individuals and non-corporate assessees earning more than Rs 5 lakh a year to file returns through the e-filing process. In other words, manual filing of ITR was no longer available for these assessees.

Besides, the disclosure of assets and liabilities for individuals whose income exceeded Rs 25 lakh was introduced in ITR forms.

From financial year 2013-14, the taxman started crediting the income tax refunds directly to the taxpayers' bank accounts through the Electronic Clearance Service (ECS), discontinuing the practice of remitting cheques by post. The Income Tax Department launched national website www.incometaxindia.gov.in with enhanced features and content.

"In case of taxpayer following cash method of accounting, new facility of carry forward of unclaimed TDS was introduced. This was beneficial for reconciliation of TDS along with income," says Mr Shah of NA Shah Associates.

The most important change in the development of e-filing in the country is the refunds, explains Mr Wadhwa.

"The Income Tax Department used to make the refunds through cheque which sometimes caused problems such as late delivery of returns which required legwork for the average assessee," he adds.

"Now, you get the refund directly credited in your account within a month of filing return... The digital transfer and timely payment of refunds emerged as the biggest positive step to encourage the assessees to file income tax returns."

The electronic tax credit statement - or Form 26AS - contains details on payments involving tax deducted at source (TDS) by the taxpayer. Previously, the 26AS was only available in physical form.

Till about three years ago, assessees had to go through the entire process of filling details such as salary and TDS breakups every time to file a return, explains Mr Wadhwa. "The I-T department is expanding the scope of pre-filled XMLs year by year. Today, other than basic information, even details such as interest and salary breakup are pre-filled," he adds.

"From financial year 2014-15, electronic verification code (EVC) was introduced as an option instead of sending ITR-V (by mail) to Centralized Processing Centre (CPC) Bengaluru, in order to simplify the process of verification. Aadhaar number and net banking can be utilised for generation of EVC," explains Mr Shah.

Today, the Income Tax Department offers seven forms to the assessees for filing their income tax returns, and one form - ITR-V - for electronic verification.

"Until about 4-5 years ago, the taxpayer had to print the acknowledgement form ITR-V, sign it physically and send it over to the CPC by mail. This entire process was lengthy and costly. Today, once the ITR is filed, its verification can be done through Aadhaar OTP-based or electronic verification code (EVC)-based processes (in case of bank and demat accounts)," says Mr Wadhwa.

"The ITR forms have not been simplified much, but they have come a long way in terms of structure, classification as well as numbering... Form applicability has definitely improved to a great extent," Mr Wadhwa explains.

The taxman expanded the "e-Sahyog" pilot initiative in 2016 to reduce the compliance cost for assessees, especially small taxpayers. The project was aimed at providing an online mechanism to resolve mismatches in ITRs without requiring taxpayers to visit the income tax office.

The top decision making body of the I-T department today reacts to assessee's concerns more rapidly, says Mr Wadhwa. "The CPC's infrastructure has improved significantly and the response time has shortened," he adds.

According to CBDT data, nearly 50 lakh people filed their tax returns online on August 31, 2019 - the last date for assessment year 2019-20. In the past few years, the income tax portal has often got temporarily jammed on the last day of submission due to heavy traffic.

In August 2019, the Income Tax Department launched a "lite" e-filing facility on its e-filing portal, aimed at easing the filing of returns. This is a lighter version of the portal, providing only essential links for e-filing ITR and 26AS (for TDS) forms.

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