Tax Reforms Transparent Taxation – Honouring the Honest

Taxes / Aug 18, 2020

The country, over a period of time now has been witnessing various Tax reforms like GST, easier tax filing methods, considerable reduction in corporate tax rates and simpler tax structure. The e-filing of tax returns is becoming a common practice in this day and age. To add to the various structural reforms taking place in the country, the Government has come up with a new scheme for the benefit of taxpayers at large which was announced by the honourable Prime Minister Shri Narendra Modi on 13th August 2020 called the Transparent Taxation –Honouring the Honest.

This new Transparent Taxation scheme is an extension of the 2019 E-Assessment scheme of the Indian Government. The three core areas of the scheme are:-

  1. Faceless Assessment
  2. Faceless Appeal
  3. Taxpayer’s Charter

Faceless Assessment and Taxpayer’s Charter came into effect from the day of announcement i.e. 13th August 2020, whereas the concept Faceless Appeal will come into effect from 25th September 2020, which marks the birth anniversary of pt. Deen Dayal Upadhyay.

The purpose of introducing a faceless tax system is to ensure fairness and fearlessness to the taxpayers. The Prime Minister said that the government in past 6 years has focused on policies like ‘banking the unbanked’, ‘securing the unsecured’, ‘funding the unfunded’ and today the government is adding ‘honouring the honest’ to this list.

Let us look at the meaning of few newly introduced terms in the policy.

Faceless Assessment – The term depicts that the tax scrutiny matters will be taken up by a faceless team. The team can be chosen from any part of the country by a random computer selection, thereby the chances of connection and influence between the person to be assessed and the team assessing will be zero ensuring transparency.

Faceless Appeal – Like faceless assessment, appeals have also been made faceless. The appeals will not be limited to the area where the assessment has been made and thereby it can be moved to any part of India based on random selection.

Taxpayer’s Charter – This charter will give rights to the taxpayers and keep up their dignity by ensuring that more trust is imposed in them by the authorities. The charter also describes the duties and obligations of the taxpayers making it a comprehensive book of details.

These terms are to be read in the light of the meanings stated above throughout the article.

Let us now look at the Objectives and features of Faceless Assessment and Appeal as released by the Ministry of Finance, Government of India.

OBJECTIVES OF FACELESS ASSESSMENT AND APPEAL:

  1. Greater efficiency
  2. Transparency
  3. Accountability
  4. Eliminating physical interface between the taxpayer and tax officers.

FEATURES OF FACELESS ASSESSMENT AND APPEAL:

  • Selection only through system using data analytics and Artificial Intelligence.
  • Dynamic Jurisdiction – abolition of territorial jurisdiction.
  • Automated random allocation of cases.
  • Central issuance of notices with Document Identification No. (DIN)
  • No physical interface.
  • No need to visit Income Tax Office.
  • Team-based assessments and Team-based review.
  • Draft assessment order in one city, review in another city and finalisation in third city.
  • Objective, fair and just order.

The vision behind introduction of this system is to ease the burden of taxpayers by removing the age-old mentality which enriched a fear creating approach in the form of Income-tax scrutiny. Under this system, the officials have to trust the taxpayers and relieve a great proportion of taxpayers from unnecessary scrutiny to catch a handful of defaulters.

Another important area where focused is placed by the government is the Taxpayer’s Charter. A comprehensive list has been released by the Ministry of Finance stating the rights and obligations of the taxpayers. The list is divided into two categories. The first category state what the Income Tax Department is committed to and the Second category cover what the department expects the taxpayers to do. Let us look at the list in detail.

TAXPAYERS’ CHARTER
THE INCOME TAX DEPARTMENT IS COMMITTED TO
  • Provide fair, courteous and reasonable treatment.
  • Treat Taxpayer as honest.
  • Provide mechanism for appeal and review.
  • Provide complete and accurate information.
  • Provide timely decisions.
  • Collect the correct amount of tax as per law.
  • Respect privacy of taxpayer.
  • Maintain confidentiality.
  • Hold its authorities accountable.
  • Enable the taxpayer to choose an authorized representative of his choice.
  • Provide mechanism to lodge complaint.
  • Provide a fair and just system.
  • Publish service standards and report periodically.
  • Reduce cost of compliance.
THE INCOMETAX DEPARTMENT EXPECTS TAXPAYERS TO
  • Be honest and compliant.
  • Be informed about the compliance obligations.
  • Keep accurate records.
  • Know what the representative does on his behalf.
  • Respond in time.
  • Pay in time.

The goal of this new policy is to create a seamless, painless and faceless tax system which will eliminate corruption and excessive bureaucratic control. The concept of territorial jurisdictions of the income-tax offices is removed and random allotment of cases is the basis of transparency. With such random allotment of cases, a document identification number will be issued from the central database. All this is made possible with the help of technology and Artificial Intelligence.

The Prime Minister while describing policy-driven governance has mentioned four reasons associated with bringing this change:

  1. Narrowing the grey areas of discretion;
  2. Having faith in the general public;
  3. Taking the help of technology to limit human interface in governance system;
  4. Awarding efficiency, sensitivity and integrity in the bureaucracy.

The following are few exceptions to the Faceless Assessment system:

  • Serious Fraud
  • International Tax
  • Major Tax Evasion
  • Sensitive matters
  • Black money Act
  • Benami Property

India currently stands on 63rd rank in the ease of doing Business Index. The country received record Foreign Direct Investment even during the COVID-19 pandemic; this is a clear evidence of the confidence of foreign investors in India’s potential.

This people-centric policy has the potential of taking the trend of reforms to another level which will be counted as a big step towards reducing the government’s interference in the lives of citizens of the country. Currently, the Indian government is in the direction to ensure that people do get benefit when they pay taxes. This will be now based on trust and technology and everything will be completely accountable. This will help in evading any sort of breach and hence guide India along with its citizens to a well-developed economy. 

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