It may be the latest in data capture, but Form 2F has simply too many warts.

Making things simple is generally difficult. And perhaps it proved to be too difficult for those entrusted with the task of simplifying the Saral income-tax return form. Which explains why the result of the exercise is a mesh of complexity christened Form 2F. By targeting individuals without any profits and gains of business or profession, capital gains, agriculture income, or more than one house property, the new form hits those it has always hurt the most the common salaried taxpayers, a class that has resigned itself to being the favourite whipping boy of successive Finance Ministers. Reams can be written on how Form 2F is a leap into the future, taking assessees to the e-filing era. Or about why it can be called user-friendly for not insisting on any enclosures or annexures to the return. But eclipsing these virtues are several flaws; the latest innovation in data capture has simply too many warts to escape attention.

First, the apparently popular move of dispensing with supporting documents is a recipe for confusion. Information given in the return without any description or authentication can only create disorder in the Department. As a result, tax officials will have to verify what is filed by looking at other information sources such as the Annual Information Return or the employers' annual TDS return, where the odds against their matching seem high. Second, the form fails the test of user-friendliness on more than one count. The two-page Saral, in its new avatar, is highly technical, and is likely to push taxpayers to professionals for help in filing the return. Take, for instance, words and phrases such as capital expenditure, investments, and outgoings; in the absence of any definition in the form, such terms are bound to confound most taxpayers.

Third, Form 2F exposes itself to criticism from a point of legality. It compels the taxpayer, by way of an instruction, to disclose income under the head `other sources' on cash basis. Arbitrary, it seems, because the new requirement can detract from the method of accounting followed by the assessee. Instructions on the form cannot override what is permitted by the Act, point out experts, in this context. Yet another point of disorder is that the cash flow statement cannot be verified from the other information available in the form, as the tax law is different from the cash basis of preparing the statement. Fourth, the form may turn out to be totally academic if one were to impute meaning to the lines that say that the new format is for only one assessment year and that the cash flow statement is optional.

The last, and most serious one, is about the propriety of demanding that people divulge details about how they spend their already-taxed income. A carrot-shaped-stick promises substantial reduction in `the probability of scrutiny assessment or any other kind of intrusive investigation'. Even as there may be growing resentment at the rigid structure called Saral, a misnomer, the taxman may yet have other means under the Income-tax Act to obtain details of your expenses.

(This article was published in the Business Line print edition dated June 8, 2006)
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