Union Budget 2020: Steps have been taken in this regard, with ITR forms released in April 2019 already having some information pre-filled such as bank account number, bank interest and salary details with standard deduction etc

If income tax return filing is a headache for you, the government has some good news. Soon, you won't have to file income tax return (ITR) at all. All your income information will come pre-filled in your ITR forms and you will only have to approve the same on the portal of the Income-Tax department. Initial steps towards the same have already been taken with ITR forms released in April 2019 already having some information pre-filled such as bank account number, bank interest and salary details with standard deduction etc. Tax experts believe Budget 2020 may have more announcements to modify ITR forms in this regard to cover details of capital gains from securities and dividends etc also.

"We hope that at least for the salaried class where ITR-I is applicable, a system may be implemented in which if the TDS has been deducted on the salary and bank interest etc, then taxpayers don't need to upload the ITR. They only have to approve the pre-filled returns on the I-T portal to complete the filing," says Vishal Anand, Partner, PwC India.

FULL COVERAGE:Union Budget 2020

What is expected in Budget 2020

Industry experts say the income tax department has had several rounds of meetings over the last few months with depositories, mutual funds and banks to ascertain the utility of more extensive return forms.

"The new forms in 2020 may have features of auto-filling of stock market transactions and bank transactions. The government may enable auto-filling through data obtained from depositories or mutual funds and banks," says Archit Gupta, CEO, ClearTax.

Notably, income on which no TDS is deducted, that is, capital gains on the sale of securities etc do not get populated in the pre-filled return forms.

"Budget 2020 may have some administrative announcements in this regard. It may make mandatory reporting by a certain category of payers in respect of income where no TDS liability arises at present. Few of such examples can be mutual fund brokers and agents for getting capital gain transaction details and companies for dividend income details (although exempt) etc," says Anand of PwC.

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At present, as per section 285BA of the Income Tax Act, 1961 banks, financial institutions, stock exchanges and certain other persons are required to file annual information reports (AIRs) of certain financial transactions such as cash deposits, term deposits, purchase of bonds, debentures, shares and mutual funds, etc of 10 lakh or more; purchase or sale of immovable property of Rs 30 lakh or more; receipt of cash payment of Rs 2 lakh or more for goods or services of any nature; and payment of credit card bill of 10 lakh or more etc.

"By removing or lowering the existing monetary limits, these AIRs can be used to get certain income and investment information for pre-populated data in the return forms," suggests Anand of PwC.

What challenges may arise

While these measures will indeed make tax filing simpler for taxpayers and help plug revenue leakages, it may throw up some challenges. "People who do not have knowledge about internet or technology (especially senior citizens) may have to take extra help to file the returns. This can be a challenge for people who are less conversant in English. Although one may choose to opt for filing return/ submission in Hindi language, it may not be so user-friendly to complete this. Presently, only resident individuals above 80 years of age (earning income other than business income) can file a return in paper form using ITR1 and ITR4," Anand says.

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Besides, it will increase the compliance burden on banks and mutual funds etc. "Such an initiative would require synchronisation of databases and information systems among several intermediaries, including banks and other financial institutions. Generally, such a system integration process has to pass tests of various aspects including data security and requires strong checks and balances. Taxpayers must be doubly sure about information that is auto-populated and its impact on the final calculation since the ultimate responsibility of filing a proper return rests on the taxpayer," Gupta of ClearTax cautions.

Key suggestions for pre-filled ITR forms

Chartered Accountant Ankit Gupta advises to implement such a facility in a phased manner. "At first, it should be made available only for salaried taxpayers having total income of less than Rs 5 lakh. It is important to educate the taxpayer; any major changes can be made successful only if the taxpayers are educated enough to tackle and understand the same," he says.

He further adds that the government should provide source of extracting respective Information so that the taxpayer can verify it accurately. Besides, it should provide column in return form to specify the reason for mismatch (if any).

Can such a system be implemented for corporate also? While tax experts do not deny it, they do feel implementation could be challenging given not much information can be auto-filled in return forms. "Majority of corporate income arises from business; therefore the department may pre-fill the turnover but can't pre-fill the relatable expenses or stocks held by the corporate at the end of the financial year," says Gupta.