The 2025 Union Budget is on the horizon, and expectations are high for the Income Tax Department to focus on simplifying tax compliance and enhancing transparency. In a world where digitization is rapidly changing the way we interact with financial systems, there is a growing need for personal tax processes to be more user-friendly and efficient. With the goal of encouraging voluntary tax compliance and reducing administrative burdens, the government is poised to make significant strides in this area.
Streamlining Data Compilation
One of the key areas that the government may consider addressing is the elimination of multiple sources of input data for taxpayers. Currently, individuals are required to compile data from various sources such as Form 26AS for TDS credits, the Annual Information Statement (AIS), and Tax Information Statement (TIS) for specific types of income. This can be a time-consuming process that leaves room for errors. By pre-populating data from filings done by Indian employers with the Reserve Bank of India (RBI) and other sources into a consolidated form like the AIS/TIS, the government can simplify the tax return process and reduce the chances of missing crucial information.
Enhancing Tax Filing Efficiency
The introduction of pre-filled Income Tax Returns (ITRs) has already proven to be a game-changer in streamlining the tax filing process. However, there is still room for improvement in terms of data extraction and automation. For example, the AIS Form should capture the complete breakdown of salary income, including details of allowances, exemptions, and capital gains. By automating this process and integrating data from various sources like banks, employers, and investment managers, taxpayers can enjoy a more effortless and effective tax filing experience.
Online TRC Applications
For Indian residents claiming relief under a Double Tax Avoidance Agreement in a foreign jurisdiction, obtaining a Tax Residency Certificate (TRC) can be a cumbersome process. Implementing an online system for TRC applications could streamline this process and enhance the overall taxpayer experience by reducing processing times and eliminating the need for multiple follow-ups.
Efficient PAN Transfer System
In situations where taxpayers relocate or experience changes in their residential status, transferring their Permanent Account Number (PAN) can be a hassle. By implementing an online portal for PAN transfer requests, the Tax Department can eliminate manual applications and reduce delays in processing these requests, providing taxpayers with a more seamless experience.
Enhanced OTP Verification
The use of One Time Passwords (OTPs) for accessing the income tax portal can be problematic if a taxpayer’s registered mobile number is no longer active. By enabling the option of sending OTPs to a registered email address and implementing additional verification processes like face recognition, the Tax Department can provide a faster and more efficient alternative for accessing the portal, enhancing user convenience and accessibility.
In conclusion, the digitization of tax compliance offers tremendous benefits for taxpayers, simplifying processes, reducing paperwork, and enabling faster communication with Tax Authorities. By embracing technology and streamlining tax processes, the government can significantly ease the burden on taxpayers, making it easier for individuals to meet their tax obligations.
