Transaction details of individual tax filers with respect of capital gains, dividend income and interest income will soon become a standard of the pre-filled Income Tax return (ITR) form as the government looks to make tax compliance convenient for taxpayers.
The Central Board of Direct Taxes (CBDT) has notified specified persons (reporting persons) that will furnish such information on behalf of individual taxpayers in the pre-filled ITR forms. This would help in easier filing of returns as taxpayers would just have to verify records of income accruing to them from such investments without having to source it individually before filling up the ITR form.
The CBDT notification has specified that details of an individual's capital gains on transfer of listed securities or units of mutual funds will be provided by recognised stock exchange, depository, recognised clearing corporation or registrar to an issue and share transfer agent. These agencies have now been included in new sub-rule of the Income Tax Act and designated as reporting persons who shall be required to furnish a statement of such financial transactions.
Similarly, details of dividend income will have to be provided by the company that has given dividend to an individual while details of interest income will be provided for pre-filled ITR forms by banking companies and cooperative banks, the Post Master General and NBFCs.
"Presently, the ITR Forms come pre-filled with details of salary income, tax deducted at source, tax payments, etc to ease the compliance burden of taxpayers. The Finance Minister, in her recent Budget speech for Finance Bill, 2021, announced that to further ease the filing of ITRs, details of capital gains from listed securities, dividend income and interest from banks, post office, etc, will be pre-filled in ITR Forms. The subject notification gives effect to the government's intent to ease the tax return filing compliance burden for taxpayers as well as to monitor compliance," tax and consulting form PwC said in a statement.
While the changes is expected to bring transparency in the tax filing process, for taxpayers, it would mean all their investment details would be shared with the IT platform and changing those details while filing the ITR would become complex. Also, it would also prevent taxpayers from hiding a portion of their income as all details would now be pre-loaded in their forms. Though in the present system, pre-filled information has to be first approved by the taxpayers.
Prime Minister Narendra Modi had launched a platform for transparent taxation in order to strengthen the government's direct tax reforms. Under the reforms, the I-T Department had presented the pre-filled forms with the purpose of making the procedure of filing returns forms easier.
The intention of the pre-filled forms is also to make filing returns easier as well as encourage more persons to disclose their come. Earlier, linking the Aadhar card, PAN card and bank accounts allowed the tax department to pre-fill the forms for individual taxpayers.
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