The Hindu Business Line : Out of Form

Taxpayers and professionals have criticised Form 2F as burden thrust on assessees. The Revenue Secretary has disclosed that the Revenue Department has an "open mind" on the issue for the next assessment year. Before this statement was made, news reports on the new form would have created lot of anxiety for taxpayers, particularly the business class, who continue to enjoy tax incentives and open-ended opportunities to minimise their tax burden. However, they need not fear as the new form does not apply to them. A closer look at the new form throws up a number of issues.

In the case of salaried assessees, the name and address of the employer have to be furnished. Strangely, there is no reference to the Permanent Account Number of the employer. Without PAN or the need to submit Form 16, how can the Department check the correctness of the salary admitted by the assessee?

In respect of income from property, the tax officials, in the absence of enclosures, cannot clearly gauge (a) the annual value of the property; (b) the period of let-out during the year; and (c) vacancy tenure of the property. As regards rent of earlier years realised during the year, the taxmen cannot know whether it is arrear rent or unrealised rent and the tax provisions deal with these items of income differently.

As for `income from other sources' for which the details are to furnished in Schedule 2, there is one residuary column `others'.

`Other sources'

There are about 20 sources of income which can be taxed under the head `other sources' and the format of the return has no room for describing the source. In the absence of annexures/enclosures, the tax department cannot know the correctness of the information furnished. A further confusion is created in that the taxpayer should give information on cash basis unless there is a compulsion to disclose the income on accrual basis.

A taxpayer having income under the head `other sources', say, from bank deposits, would have admitted income on accrual basis so far. And now, requiring information on cash basis in the return is not valid, as the I-T Act gives the assessee the privilege of offering income on a basis opted by him. If he obliges to offer the income on cash basis as per the instruction given in Form 2F, it will only create confusion in due course of time because of the change in method of taxing the income.

In respect of exempted incomes, Instruction 14 says that incomes have to be disclosed on cash basis. This may not affect the taxpayer and, hence, there is justification for disclosing the exempted incomes on cash basis for enabling the verification of cash-flow statement.

Chapter VI-A deductions claimed by the assessee, particularly under Sections 80DD, 80DDB and 80U, require supporting information. In the absence of annexures, the Department will have to undertake extensive verification for allowing these deductions.

Where the taxpayer is a pensioner, the details of pension income cannot be known unless it exceeds the taxable limit. The correctness of those details too cannot be verified.

It looks as if Form 2F may not last beyond assessment year (AY) 2006-07. Mentioning the assessment year in the form itself — that is, it for the assessment year 2006-07 — seems to indicate that the form has been prescribed by the tax administrators on a trial basis.

It would be in the fitness of things if the form were discontinued from the next assessment year and the whole filing process simplified.

(The author is an Erode-based chartered accountant.)

V. K. Subramani

More Stories on : Taxation | Income Tax | Reassessment

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
RBI applies repo brakes

Kill fake pills

Monopoly menu that put the taxman in a mandap soup

A catalogue of failures

A bypass to Taiwan

Landmark ruling on permanent establishment

Out of Form

Time to redraw `the wealth maps'