The income tax department will maintain the number of tax returns chosen for scrutiny at the current level of less than 1% of all returns in spite of a surge in individual tax filings to keep the process non-intrusive and tax-payer friendly.
Gentle persuasion through text messages, emails and advertisements will remain the department’s main ways of interacting with tax payers, while enforcement action will be reserved for cases where specific tip offs regarding large scale evasions have been received.
Out of the 52.8 million income tax returns filed for 2015-16, only about 300,000 cases, or about 0.6% of all returns received, were scrutinised, a person privy to the deliberations within the tax department said on condition of anonymity. “Even when the number of our assessees grow, scrutiny will be limited to this level—250,000-400,000 cases. It will always be less than 1% of returns received. We are absolutely non-intrusive to almost every one. Even in most of the cases scrutinised, we do not hold searches or surveys.”
Searches conducted by the authority–about 600 such cases happen in a year–will also stay at this level in future.
“Only when we get very, very specific information of tax evasion of a substantial amount, we take enforcement action,” said the person cited above.
The department recently sent 17 million text messages to individuals urging them to file returns for FY2017 before the due date of August 5, said the official. This has led to a 25% jump in personal income tax return filings for 2016-17 to 27.9 million before the due date compared to the same period in the previous year.
Going by past trends, this figure could rise to about 66 million returns by the end of March 2018. Returns for a particular financial year can be filed by the end of the next year, called the assessment year, with interest on tax dues if any. Close to three-fifth of the 52.8 million returns the department received for 2015-16 had come in after the due date in August 2016.
“Engaging with people through electronic means is easy and is a better strategy to ensure compliance than scrutinising more tax returns,” said Rahul Garg, partner, PwC India.
The department is also processing refunds faster. It has started issuing refunds within 10 days to people who have filed their returns before August 5.
Individuals who make large purchases, such as cars priced above ₹10 lakh or homes, but do not file tax returns, figure among those who get gentle reminders to file their returns as the authority secures information about such transactions from other sources