Why is filing the tax return such a complex task?



The deadline for filing tax returns by individual taxpayers has recently been extended to December 31 from the earlier extended date of September 30. Such an extension was made necessary because taxpayers encountered problems filling out their returns on the new income tax portal, which launched on June 8. The Minister of Finance had set September 15 as the deadline for the software publisher who built the portal to fix the problems. The deadline has passed, but the problems persist. This raises a question: Are our tax laws and procedures too complex and convoluted to be easily understood and integrated, even by a world-renowned software developer, or were the development plans for the new portal too ambitious, without get the right details first? ?

The complexity of our tax laws is undoubtedly an important factor. In its haste to fill any loopholes uncovered by court or tribunal rulings favorable to the taxpayer, the government adds dozens of fixes to existing tax laws each year. This has made tax laws massive coverage, with many fixes, some of which are inconsistent with others.

There are so many permutations and combinations for even simple things that every time even a tax professional or chartered accountant has to struggle to understand what the law really says. A classic example is that of capital gains: there are different tax rates depending on the length of ownership, the type of asset, etc. of assets to be considered as a long-term fixed asset, etc. Even for the calculation of your basic tax, you need to perform two parallel calculations to determine which tax method is advantageous for you – and to opt for a particular method, you may need to file a form within a specified time frame. Otherwise, you may not be able to follow this method.

Filling out tax forms is another complex task in itself. Income tax returns sometimes require various details due to the complexity of the law – for example, in the case of capital gains and dividends, you must provide quarterly details to enable the calculation of interest payable, you must provide details of stock transactions. sold on the stock exchange for the calculation of your capital gains, etc.

Invariably, you will find that the form has errors while you try to download it, which you may need to correct before trying again. Finally, after three or four laps, you are able to breathe a sigh of relief when the form is finally free from errors. Afterwards, verifying the form is another challenge that you need to overcome, especially if your email address or mobile number with the tax department is different from those registered with the Aadhaar card or bank account.

After filing a return for one year, you cannot relax and assume that you will be successful next year as well, as laws and forms change every year; the same applies to the way in which the various sections are to be completed and to the software utility.

It is a well-known fact that even most chartered accountants who do not practice taxation are unable to file their own tax returns, given the complexities involved, but must outsource them to those familiar with the complexities. . Those who are not computer savvy may not even dream of filing their own tax returns.

The worst part of electronic tax returns is that they are often designed based on the tax department’s interpretation of the legal provisions and do not give you the choice of completing the returns in an alternative way, even if your perspective is is supported by court decisions. There have been at least a few instances where the taxpayer has had to obtain an order from the high court to order the tax authorities to accept a manual return because the electronic tax return did not provide them with the opportunity to claim a benefit. to which he was entitled.

Given all of these existing issues, one wonders if it was wise to try and build a whole new fiscal portal from scratch and launch it during times of covid lockdown, and expect that it meets expectations. Perhaps it could have been implemented in stages, or it could have been designed after extensive consultation with taxpayers and filers, and after simplifying tax laws.

As the Supreme Court rightly observed last week in a tax case: “The tax that an individual or business is required to pay is a matter of planning for a taxpayer and the government should strive to keep it practical and simple to maximize compliance. “We hope that these words from the Supreme Court will serve as a wake-up call to the government.

Gautam Nayak is a partner, CNK and Associates LLP.

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