Tax payers using the form would not be sent notices for high-value deals.
With pressure mounting on the finance ministry to withdraw the controversial income tax return Form 2F, the revenue department is considering giving incentives to taxpayers to use the form from the next fiscal.
Ministry officials said one of the options being considered was to continue this years policy of keeping the use of the form optional. In addition, taxpayers who use the form will have the benefit of not getting their returns picked up under the computer assisted scrutiny system.
Another incentive being considered is that those filing tax returns through Form 2F will not be sent notices for transactions captured under annual information returns. The discussions are really in a preliminary stage. But we are considering some incentives, an official said.
Annual information returns is a system for capturing information about high-value transactions from third-party sources such as banks, credit card companies and registrars of property. The income tax department, at present, has seven transactions under annual information returns. These include cash deposits exceeding Rs 10 lakh, credit card payment exceeding Rs 2 lakh, purchase and sale of property of more than Rs 30 lakh and purchase of Reserve Bank of India bonds of more than Rs 5 lakh.
Officials admit that owing to the controversy regarding the use of Form 2F, particularly the inclusion of the cash flow statement, only 100 returns have been filed this year using the form.
Form 2F will not be withdrawn. The cash flow statement, which requires taxpayers to give details of their annual expenditure, also cannot be withdrawn since that is the essence of the form, an official said.
A parliamentary standing committee on finance had recently termed Form 2F as cumbersome, lengthy and fit enough to be called difficult vis-a-vis an improved version of the erstwhile Naya Saral form.
Referring to the inclusion of a cash flow statement in return forms 2, 2F and 3, the committee said, in the light of the fact that only 2 per cent of the returns filed are subject to scrutiny assessment and the department is supposed to accept the disclosures made by the taxpayers in the balance 98 per cent of the returns, the committee finds it absolutely unnecessary to include cash flow statement in the return forms.
The income tax department had earlier this year notified new tax return forms 2F, 3A, 1, 2, 2D, 3, 3A and 16AA. Form 2F had come under a lot of criticism for inclusion of a cash flow statement, which sought to obtain information regarding certain expenditures of an individual taxpayer.