ITR filing: For salaried individuals, annual ITR requires collecting their form-16, and all investments into a 26A. It’s not just that, but also collating all equities portfolio and trades done the previous fiscal, and so on.
Currently it takes human effort, some more humane emotions, and extended deadlines by the tax authorities, to go through an Income Tax Returns (ITR) filing, every year. And the rigmarole continues every quarter for the advance tax payment.
For salaried individuals, annual ITR requires collecting their form-16, and all investments into a 26A. It’s not just that, but also collating all equities portfolio and trades done the previous fiscal, and so on. And then either self-filing the ITR or getting professional help. What can be a simple technology driven exercise seems a drudgery or even a painful rigmarole.
Automation and data governance
Last few years, we have seen improvement in the speed of ITR assessments and refund process linked with it.
Of late, assessments and refunds are done in less than a fortnight ! That’s kudos to digitalising the records and creating a national framework for tracking salaries, investments (including bank FDs, mutual funds, demat holding, insurance etc). With this improved ability to track financial transactions of various asset classes, with PAN (Permanent Account Number) as unique identifier, it is now up to data governance in how we can offer increased citizenry benefits.
Regulators and Data-sets
Globally regulators have increasingly been looking to big-data-sets (including structured financial data, payment transactions, unstructured granular data including from the internet) and analytics to provide new insights, enhance quality of their risk-assessments and forecasts. Over 70 countries have adopted XBRL as standard data format for data governance, while in India we have bits and pieces of this adoption, and are yet to leverage its full potential.
With basic assumption that data governance is robust, it would make for data traceability, data integrity, data traceability and real-time information. It can revolutionise the way ITR is filed.
Imagine if as the individual tax assessee, you don’t need to do anything !
The principle on which this idea is based in trusting the data framework (and widening better coverage of all asset classes possible) and easing the citizens’ dealings with economic-regulations.
We can simply move from assessee-based ITR filing to Income Tax department automatically pulling all transaction data for every PAN and the Tax authorities running large-scale analytics on their encrypted servers, to automatically apply rule-based algorithms to calculate the ITR of every individual in the country or atleast for every PAN that’s in their database.
This can make the exercise of individual assesses filing their IT returns simply redundant and save so much of collective time ! And importantly, it can catalyse the shift to digital-only flow of asset transactions as well as all borrowings, gifting, etc.
Imagine if this idea, once feasible, will be automatically able to calculate if any additional tax is payable or if any refund is due and credit the amount directly into the assessee account. This can bring a scenario where by April 15th of every year, the machine based IT assessments can be done for the previous financial year and sufficient time given for differential-taxes to be paid or any appeals to be made. A stark contrast from current scenario of waiting for months to get citizens to file ITR. The same logic can apply for advance tax calculation every quarter !
The happiest lot would be the IT assesses and the GoI. The worst hit, from short-term livelihood perspective, would be the service industry that thrives in the complexity or fear of the ITR process - the service providers who help in filing ITR !
Of course this exercise of converting rules into algorithms and to build a secure platform will need efforts; skills for which are available in plenty in India.
It’s not about if this idea is possible.
It’s about by when can we see this in action.
—The author, Srinath Sridharan, is Corporate Advisor and Independent markets commentator. Views expressed are personal
(Edited by : Anshul)
First Published: IST