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Many changes in tax regime on the anvil
February, 01st 2016

When the finance minister presents the Union Budget, we wait eagerly for provisions that will benefit us. While this may be an annual exercise one must also step back and carefully analyse a few emerging trends in the tax arena and assess how they impact individual taxpayers. This will also help in planning for the future.

Here are few trends we have noticed over the recent years, which help gain knowledge about potential provisions.


The Indian Tax Authorities (ITA) have made sub stantial progress in using technology to make it easy for individuals to manage their tax matters. We can now file our tax-returns online, we have technology enabled Centralised Processing Centers and computer-based selection of scrutiny cases. Tax refunds are now credited directly into the individual's bank account and tax notices are being deliv ered via email. These initiatives are examples of how we are adopting technology enabled systems. It may not be surprising if the ITA launches a mobile application - which can help you access your tax database on mobile at the click of a button.


In addition to reporting income (and eligible expensesdeductions) on the tax return, there is additional reporting of financial information - such as reporting specified assets (foreign asset reporting by ordinary resident taxpayers), reporting by institutions for specified transactions by customers under Annual Information Returns (AIR) (FIs to report credit card spend above a threshold, investments in government securities above a limit), reporting by government institutions (registrar of properties to report property transactions beyond specified value), reporting by tax deductors (quarterly tax deducted at source returns), and others.

This automatically gives the ITA access to ample information about the taxpayer in an organised manner. This would make it imperative for the taxpayers to be more diligent while preparing their tax returns, to correctly assess all the ancillary information that may have an impact on the income to be reported on the tax return. Appropriate knowledge of the tax provisions would be the need of the hour.

It is being observed that various departments within the government have enhanced their interdepartment information sharing system. A recent example of this is the eSahyog project which requests taxpayers to explain differences (if any) in the information provided in their income tax return vis-a-vis information provided to other authorities like value of sales in the Value Added Tax (VAT) return, sale value of property to registrar.This enables the ITA to assess the income reported by taxpayers on a consistent basis and reconcile records presented to dif ferent regulatory authorities.

As a corollary, this also gives taxpayers a ba sis to believe that various au thorities will access the same data.


Historical anal ysis of the Indian tax rates reveals that the tax rates have gradually come down.The basic exemption increased from `15,000 per annum in FY1984-85 to `250,000 pa at present. The maximum income tax rate went down from 55% in from 55% in FY1984-85 to 34.62% now. As a corollary , the ITA is also limiting the number of available exemptionsdeductions and may be a flat structure for individual tax.


The present government has laid significant emphasis on `undisclosed income assets' and also brought in legislation to give more powers to the ITA to tackle this issue. With the growing information sharing between governments, this could gain more focus in the future.


The recent abolition of wealth tax and introduction of one of the largest indirect tax reforms, the GST, indicates the move to fewer tax laws with enhanced focus on compliance and simplification. So, as we equip ourselves to move from machine technology age to the new disruptive technology age, one should also plan hisher financial affairs keeping in mind these changes and take a more proactive approach towards tax affairs.

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