Form factor

Usually, statistics on direct tax receipts come with a narrative on the reason for increase or decrease in those taxes. The reason is normally linked to how well/badly companies are doing which, in turn, becomes a reflection of how the economy is doing. Through a proposed amendment to the Income Tax Act and issuing an alphabetical accompaniment to Form 28A in the Income Tax Rules, the Government appears to be attempting to ask the taxpayer to submit further details in case there is a reduction on his/her income and tax liability.

It has been proposed to insert Rule 39A in the Income Tax Rules that would apply only to businesses and professionals whose turnover is in excess of ₹1 crore or ₹50 lakh, respectively. All taxpayers falling in this category would need to furnish an intimation of estimated income and payment of taxes as on September 30 of the previous year, on or before November 15 of the previous year.

Out of this, those whose income estimated as on September 30 of the previous year is less than the income of the corresponding period of the immediately preceding previous year by ₹5 lakh or 10 per cent, whichever is higher, would need to furnish an intimation of estimated income and payment of taxes as on December 31 of the previous year, on or before January 31 of the previous year.

Filling in Form 28AA would involve computing taxable income under different heads of income after taking into account the deduction of taxes. The instructions to fill in the form state that if the estimated advance-tax payment for the previous year is less than the advance tax paid during the preceding previous year, reasons for the same have to be stated.

It would appear that the taxpayer is free to assign any reason here. Providing details of the estimated income and the consequential tax liability is not a new concept; a similar estimate was being provided a few decades ago.

While providing the details required would not get taxpayers into a sweat, the timing of the proposal could trigger concerns over the real purpose for the proposal. The draft Notification states that the reason is to create a self-reporting mechanism of current income, tax payments and advance taxes on voluntary compliance basis for a certain category of taxpayers.

Over the last couple of months, taxpayers have been at the receiving end of a series of notices on currency notes and demonetisation. Despite responses having been given, further notices have been issued in some cases, ostensibly because the tax department feels something is fishy while the taxpayer feels the department is clueless on how to handle the mountains of information on thecurrency notes they hold.

Forcing another form on the taxpayer at this point in time would appear to reinforce the opinion that the department is hitting out in all directions just to keep a conversation with the taxpayer going on. Still, the tax department deserves kudos for not proposing any interest or penalty for not furnishing Form 28AA as has been their wont from past experience.

It is becoming clear that in the next years taxpayers would need to spend enormous amounts of time in complying with innumerable forms and providing a lot of information in both direct and indirect taxes. Possibly the only provision lacking in the Income Tax Act is an incentive in the form of a nominal tax deduction to do so.

The writer is a chartered accountant

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