Nobody likes to pay taxes – and Indians are particularly good at evading them. In a country of 1.25 billion people, less than two crore people actually paid income tax in the year 2012, according to the latest data available. The government knows it only too well and hopes to double the tax payer base from an existing four crore assessees (not all of whom actually pay taxes) to about 10 crore tax payers during its current term.
Apart from curbing black money in the economy, the government is nudging the tax department to maintain a “friendly” relationship with people so that they don’t evade taxes.
“People of India are inherently honest. If you build trust then people will pay taxes and you will be able to achieve the target,” Prime Minister Narendra Modi told tax officers last month. “If you become taxpayer friendly, then taxes will automatically come to you.”
A crucial part of this approach is making it easier to calculate and file tax returns – something that has given people nightmares over the years. While tax returns often mean many people claim taxes back on account of savings or long term investment, it is important for an economy to know just how many people are able and willing to be under the tax net. The number for India, unfortunately, is too small.
“It is clear from the income tax return statistics that direct taxes continue to be evaded in substantial measure,” The Hindu wrote in an editorial in May. “Due to the failure in bringing enough well-off Indians into the direct tax net, the country has been mobilising revenue through indirect tax collection.”
The government plans to ride on the back of rising internet penetration in the country to bring more people in the tax net and its efforts seem to be bearing some results as well.
Earlier, it used to be a maze of forms, disclosures, submissions and verifications to be done each year after one would finish assessing their own income, savings, investment and exemption details. The queues were horrid and the last-minute rush was reason enough for many to not file their returns on the taxes they had paid already.
Now, things have changed for the better. The government has moved many of these processes online and a salaried individual, for instance, can file his complete tax return and verify it online on the government portal in a matter of minutes. Moreover, the government has also notified new forms for high net-worth individuals which aim to curb black money by seeking more information though they add to the burden of filling a few extra pages.
Those filing their returns online, however, have help at hand.
A few years ago hardly anyone was filing their taxes online and now, most of them are. More than 2.6 crore people had already filed their income tax returns online for the current year by May 31, according to data released by the Income Tax department.
This marks a substantial increase of about 30% year-on-year as around 1.6 crore people filed their returns online in the financial year ending March 2015. This is a sharp rise in online filing from just 19 lakh returns filed online in the year 2010-11 even though one has to account for technological advances that the previous United Progressive Alliance-led government made to make the process more convenient.
The Income Tax Department data also showed that the government’s newly launched e-verification feature is off to a good start. This is significant because e-filing is compulsory only for those earning above Rs 5 lakhs per year, the total number of which is less than 10% of the assessees.
E-verification saves time for an individual by allowing them to verify the return online instead of printing out the form and sending it by post to the tax department’s office in Bengaluru. As of September last year, more than three million people had verified their returns electronically.
Meanwhile, online filing websites have stepped in the space to help users who would previously shy away from filing returns altogether. ClearTax, a website that allows individuals and businesses to file taxes digitally, claims that it has already catered to 12 lakh users.
The site’s software allows people to upload relevant forms such as Form 16A for Tax Deducted at Source, retrieves the relevant information from it, fills it in the original Income Tax Return form issued by the government, even submitting it online.
“We see users who range from salaried professionals to non-resident Indians sitting outside the country who don’t want to go through the trouble of navigating the complicated process on the official site,” said Archit Gupta, Founder, ClearTax. "Almost 90% of all returns are now being filed online which bodes well for the economy as well as the tax officials who face much less paperwork now."
Gupta added that his site often sees high volumes during the final few days of filing returns but earns major parts of its revenues through its business offerings which allow companies to do their tax work online.
ClearTax is not the only one to offer online tax filing. Several other players have entered the space like Taxsmile and Quicko. A report in The Hindu said that the page visits to Quicko doubled between the months of May and June even as its founder claimed that the focus was to create a platform to aid financial planning.
“Our objective is to build a do-it-yourself software that simplifies the entire process of tax filing and also aids in management of finances,” Quicko founder Vishvajit Sonagara told the paper. “We encourage the taxpayers to not only file returns, but to also build an investment portfolio.”
Even as tax portals help people file taxes online with ease, there is no dearth of those requiring services of a professional accountant to do their taxes. While sites like Cleartax pre-empted this need and offer assisted services ranging from Rs 500 to Rs 10,000 depending on the complexity of filing, individual Chartered Accountants claim that online filing is perhaps the way to widen India’s tax payer base.
Online filing will ensure that at least new employees will not start evading taxation because of the difficult process, said Ashish Gupta, a practicing CA in Delhi.
“A first-time employee who has been working for one or two years doesn’t want to visit the tax office or pay a huge sum to a CA to do his taxes and online filing presents itself as a viable alternative,” Gupta said. “However, the government portals aren’t the best around and many bugs need to be fixed to make this process smooth and even more convenient so that there are no excuses for evading [taxes].”
