Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
From UPSC perspective, the following things are important:
Prelims level: Tax Code
Mains level: Tehnology reforms in Taxation System
Technology has transformed the face of tax administration in India, benefiting taxpayers and authorities alike. Electronic interface replacing manual transactions over the years has not only enhanced the taxpayer experience and the efficiency of tax authorities tremendously, but has also heralded a new era of tax transparency.
Reforms Undertaken for Tax Transparency
- Electronic interface replacing manual transactions over the years has not only enhanced the taxpayer experience and the efficiency of tax authorities tremendously, but has also heralded a new era of tax transparency.
- Even adoption of technology by corporates in their tax functions has been catalysed by the use of technology by the tax department.
- The finance minister’s announcement in the Budget speech is a clear indication of the recognition of the importance of technology in tax functions and the confidence of the department in its ability to achieve its goals by using technology.
Adoption of technology by Income Tax Department
- That the Income Tax Department has been at the forefront in adopting technology is not an overstatement.
- The department is the torchbearer in digital adoption (even ahead of the private sector at times). Initiatives taken in the last decade to leverage technology are testimony to this—be it the Centralised Processing Centre (CPC) in Bangalore for processing I-T returns in an automated, rule-based manner, or the TDS CPC, a transformational initiative undertaken by the department for TDS administration. Initiatives for e-filing of income tax round the clock and providing single-window access to income tax-related services for citizens and other stakeholders have revolutionised the landscape.
- Adoption of technology has been backed by process re-engineering, and has helped the department create a foundation for administering a fast-growing tax base, with an ever-increasing focus on taxpayers’ experience and voluntary compliance.
Major Technological Initiative
- The finance minister spoke about two major initiatives.
- These encompass processing of returns within 24 hours, with refunds issued simultaneously, and the department’s shift towards a regime where all verification and assessment of returns will be done electronically, in an anonymous manner, without there being any physical interface between taxpayers and tax officers.
- The first project announced is the `4,241.97 crore Integrated E-filing and Centralised Processing Centre 2.0 Project, which was approved by the Cabinet on January 17, 2019.
- This next-generation income-tax e-filing system will cut down the processing time for returns to less than 24 hours and credit refunds to taxpayers’ bank accounts expeditiously.
- This means the turnaround time for processing of returns will be reduced to hours.
- The system will also help enhance taxpayers’ awareness and knowledge through continuous engagement, and help improve tax compliance while ensuring transparency and accountability.
- In line with digital transformation under Digital India, the new solution aims to revamp taxpayers’ experience, and at the same time promote voluntary tax compliance and reduce tax arrears.
Income Tax E-Assessment Scheme
- This initiative seeks to ensure that “no person will be required to appear personally or through an authorised representative before a designated authority (of the I-T Department) in connection with any proceedings,” which implies jurisdiction-less and faceless service delivery.
- Minimising physical touchpoints will certainly be a transformational change aimed at bringing in transparency in the system. E-assessment will be further strengthened by the intelligence generated through the Project Insight of the I-T Department.
- Technology-driven innovation is key to achieve the tax policy’s objective of a wider tax base, resulting in moderate rates.
- Newer technology propositions are being adopted by the tax department and businesses, and it seems that in the not-too-distant future all tax-worthy people would hold their heads high by paying desired taxes and no one would face challenge of unreasonable tax assertion.
- Emerging technology-driven initiatives will bring in new synergies between the tax department and taxpayers, and transform the way income tax is administered in India.