Ease of living will be a key theme of the forthcoming budget that may provide incentives to states for undertaking citizen-centric reforms, and further reduce compliance burdens for businesses, particularly in tax administration, in lines with Prime Minister Narendra Modi’s directive at the recent chief ministers’ conclave in Varanasi.
Although over 25,000 compliances have been reduced by the Centre so far to promote ease of living, Modi wants more from central ministries and wants to prod states to follow suit. The budget, scheduled to be presented on February 1, is being prepared keeping this aspect in the mind, three people aware of the development said on condition of anonymity.
“Ease of compliance is just one part of what the Prime Minister means about ease of living. He wants a better life for citizens through better physical and social infrastructure such as efficient roads, power and digital connectivity, zero budget natural farming, and clean water, air and habitation,” one of them said. “The budget may give emphasis to all these factors.”
Modi has urged states, particularly those governed by the Bharatiya Janata Party, to work on the principle of minimum government, maximum governance, and assured them to provide central assistance in its implementation, the person said. The Prime Minister on December 14 met chief ministers of BJP-ruled states in Varanasi and discussed good governance practices for the betterment of citizens, a second person said.
Addressing a national workshop on the next phase of reforms to reduce compliance burden on December 22, commerce minister Piyush Goyal urged the political leadership, bureaucracy and industry to reduce compliance burden on principles of simplicity and timely delivery of services. He stressed on the need to decriminalise legal metrology and promote self-certification with a robust monitoring mechanism.
Goyal called for creation of a single identification number for businesses and individuals by merging existing identification numbers such as the Aadhaar unique ID number, permanent account number (PAN), and tax deduction and collection account number (TAN).
The government has made tax administration easier by legacy dispute resolution schemes, decriminalisation of minor offences, pre-filled returns and system of faceless assessment, appeal and penalty. These measures have made lives of taxpayers easier and encouraged more people to come into the tax net, a third person said. “Authorities are working for further ease and some of new initiatives may find mention in the budget,” the person said.
Data analytics has been a hallmark of the Indian tax administration in recent years, with some notable initiatives such as launch of the new income tax portal and pre-filling of tax return data to simplify the filing process, according to Rahul Patni, digital tax leader at EY India, a consultancy.
“Better tax data management and technological advancement shall continue to remain key catalysts in resolving all the aforementioned issues,” Patni said. “Hence, tax administration should keep investing in their digital agenda and continue to leverage on their technological capabilities to ensure that the overall compliance burden is reduced and taxpayer experience in collaborating with the tax administration is enhanced.”
Instead of opting for the simple tax regime, many taxpayers have continued with tax deductions and exemptions as they help them in paying lower taxes, said Archit Gupta, founder and CEO of tax consultancy firm Clear (formerly ClearTax).
“Therefore, budget 2022 is a good opportunity to review the new tax regime to make it even truly taxpayer friendly,” he said. The budget on February 1, 2020, announced an optional income tax regime that levied a lower tax rate on people who do not want to claim any of the specified exemptions or deductions.
The new income-tax portal, which aims at making compliance simpler for taxpayers, could be made more efficient and the two forms – Form 26AS and AIS – should be merged to provide single source of reliable information to the taxpayer for ease of compliance, Gupta said.
Form 26AS is an annual statement that provides details of tax deductions, tax collections, advance tax, self-assessment tax, and details of refunds. Similarly, the Annual Information Statement, or AIS, provides information about a taxpayer’s incomes, financial transactions and tax details.