The Hindu Business Line : The criteria mania

THE requirement of filing returns on the basis of economic indicators was first introduced by the Finance Act, 1997. Initially, there were only two indicators. This was later raised to four and then to six.

There have been other changes in the scheme, such as exempting senior citizens from filing returns merely on the basis of ownership of immovable property, being subscriber to a telephone and pensioners fulfilling the prescribed conditions.

It is, however, surprising to find that though the scheme has been in force for years, the CBDT has not come out with any information about the i) number of new taxpayers added, consequent to the filing of returns under the scheme; and ii) the revenue gain.

Changes in Finance Bill

The explanatory memorandum to the Finance Bill does not indicate why cellular phones have been excluded from the list of indicators and how the new criteria will help in widening the tax base.

Apart from the changes to the one-by-six scheme, the following further stipulations with regard to filing of returns are proposed in the I-T Act:

All partnership firms will have to file returns, irrespective of their level of income (or loss).

The basis for filing of return is to be shifted from total income to gross total income. In other words, all persons, claiming deductions under Chapter VI-A or under Sections 10A, 10B and 10BA shall be required to file their return even if their income after claiming such deductions is below the taxable limit.

Earlier, too, laws have been changed to collect more information. The latest is the insertion of Section 285BA in Finance Act, 2005 with regard to furnishing of information returns. Taxpayers are entitled to know how the loads of information collected from taxpayers and others, at considerable cost, time and energy, are being used.

That much of the information so obtained was not being made used was conceded by Mr Chidambaram even in his Budget speech of 2004, where he said that of the 3.40-crore persons on the I-T Department's records, 74 lakh file returns but pay no tax. Majority of them are likely to be those filing returns under the one-by-six scheme.

When introducing the one-by-two scheme for the first time in 1997, Mr Chidambaram said, "Those who live in apparent comfort must have the satisfaction of finding their names in the records of the I-T Department." It appears, this objective is certainly being fulfilled, though there may be no gain to the Revenue commensurate with the increase in the number of taxpayers.

(The author is a former chairman of the CBDT.)

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