Have you heard that only ~ 2 crore Indians are paying Income Tax in India ? As on date, 6.16 crores Tax payers have filed their returns for AY 2022-23 in Income portal out of population of 138 crore .Finance Minister also pointed out his point during budget speech . Now you may think where we are moving ? What is the future of Income Tax in India ?
You may think Why should I bother about Income Tax ? It is the government’s duty to collect Tax but it is also our duty to contribute to Nation building. I think it is important for all of us to understand rapid changes around us like Digital adoption, changes in GST, Artificial Intelligence , Automation , Financial awareness and formation of formal economy . There were significant changes that happened post 2016 . We will try to understand each aspect and see how it will impact Income Tax in India and the pocket of the individual taxpayer .
Demonetisation:
Post demonetisation of 2016, people have started using digital payment as a normally accepted payment method . Before 2016, you have to carry minimum two to five thousand rupees in your pocket . This depends on your requirement. Even shop owners at few shops will give you a terrible look if you take out a credit card as it involves 2% charges to them. Now using UPI is normal and the fact that it is very easy and convenient.
Entry of Jio :
Mukesh Ambani led Jio with their most affordable data helped Indians to migrate to 4G smartphones in 2016 and further increase data usage .Further availability of 4G mobile devices also helped the entire ecosystem .
Goods and Service Tax (GST ) :
GST was rolled out from 01.07.2017 which provided access to our books of Accounts to the Government of India . E-way bill , e-invoices have changed the way we use to do business. You have to inform details of sales invoice to government and generate IRN number and print on invoice . Now government is having absolute visibility regarding movement of goods. Businesses with Rs. 10 crore turnover and above are required to follow e-invoice rules. More and more businesses are now under the GST net. Even lastly applicable to unbranded commodities like rice if they are pre-packaged and labelled and is levied on all bags under 25 kg .
Covid 19 :
Since India has already adopted digital payment mode , it was very easy for us to process payment digitally with Paytm, Gpay, Phone Pe and UPI payments . UPI transaction in 2021 was over Rs.73 Lakh crores. People got time to look at their business model and find innovative ways to develop their business and do cost reduction . Work from Home is an acceptable way in India. People moved to their hometown . This helped to tape Tier-III Cities/towns and villages .
New Income Tax Website and use of AI:
We don’t know which technology is being used but one thing is clear that now it is very easy to file returns in terms of Income tax website response. After initial issues, it is now working fine. On the last day of ITR filing i.e on 31st July,2022, 72.42 Lakhs ITRs were filed . As on date , the department has processed 5.08 crore ITR out of the total 6.16 crore ITR filed. ITR is processed within a day and refunds are also processed so fast.
You may have noticed that this time with the use of Annual Information Statement (AIS) and Tax Information Statement (TIS), the Income Tax department is telling you what investment you have made in equity or Bank deposit etc. This is compelling tax payer to show correct Income in ITR. Even if you forget to offer some income and the timeline to revise ITR is also lapsed, you can offer that income by filing ITR – U .
What is the future of Income Tax in India with above tax, policy and technological changes ?
Now let us try to connect the dots . Use of UPI and other wallets result in formal banking transactions and will have proper trail . Income tax department will definitely ask questions in case the taxpayer has not offered income for taxes. Since more and more sectors are getting under GST net, it may help to collect higher Income Tax as well. TDS/TCS provision on Sales/Purchase and TDS on benefits paid under section 194R like free medicines to Doctor, free foreign trips to Dealer will also bring more income under Income Tax Act. Recently we have observed so many Income Tax searches in various Indian cities . It is a clear indication to charge taxpayers who are trying to evade Income Tax .
As per recent press release dated 17.06.2022 by Ministry of finance, “The figures of Direct Tax collections for the Financial Year 2022-23, as on 16.06.2022 show that net collections are at Rs.3,39,225 crore compared to Rs. 2,33,651 crore over the corresponding period of the preceding year, representing an increase of 45% over the collections of the preceding year.” . GST collection in the month of Aug-2022 was Rs. 1.43 Lakhs crore which is 28% higher than Aug-2021 . It is very clear that Income tax collection will increase in coming days on account of discussed points earlier and with increase in GST net & collection .
Faceless Assessment:
Further faceless Income Tax Assessment is going on for the last two years. Taxpayer is not required to visit Income Tax office . He can reply to notice from Income tax portal . Now you don’t know who is your Income Tax officer and the person who is doing your assessment is also not aware that for which taxpayer he is doing assessment. That is why, it is faceless. So while filing ITR, Taxpayer should keep all documentation properly and should take professional help on need basis to avoid any last moment surprise.
What is your view . Give your feedback in comment section . Have you have planned your investment . NPS is a good product for Investment and tax saving. Do read our post National Pension Scheme – NPS can give benefit up to 42% in first year in this regard.
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