In a bid to increase tax compliance, the income-tax department is considering providing pre-populated forms for filing returns. A good portion of information, such as data received from employers and third-party sources, may be pre-filled by the tax department in these forms - in line with the global practice.
"Additional information and data will be available so that the taxpayer is required to give only necessary details. Contact details like name and address, PAN, and details of tax already deducted may be pre-filled," said an income-tax department official who did not wish to be named.
The department would use information from sources like the Annual Information Returns, Form 16A given by employers, and Form 26AS. Details of home loan, house rent, insurance policies, savings and investments, besides tax deducted at source by employer, are available in Form 16A. Form 26AS, on the other hand, provides details of other TDS.
As taxpayers would be responsible for the details filed in returns, they would be free to correct any information pre-filled by the tax department in the form.
For a given year, some fields in the new form might come pre-populated with data from the form filled the previous years. The pre-filled forms might be optional for taxpayers and, initially, only those filing returns electronically might be provided this facility.
The system is likely to reduce cost of compliance for many taxpayers who currently have to take the services of chartered accountants or agents for filing their returns. For those currently filing their returns on their own, it would save time, as well as trouble of locating multiple records.
However, there are concerns, too. There's fear that these forms might dissuade taxpayers from disclosing information the revenue authority is not already aware of. Besides, getting information in case of non-salaried taxpayers could also be difficult. Therefore, the government might initially extend this facility only to taxpayers with income from salary. At present, ITR1 and ITR2 are used by salaried taxpayers.
The government's efforts to provide pre-filled forms are in line with its tax simplification initiatives, similar to those being undertaken in many Organisation for Economic Cooperation and Development countries. Denmark was the first to start this (in 1988); it was followed by Sweden in 1994 and many other Nordic countries in early 2000s. Chile, Slovenia, Spain, Australia, Estonia, Finland, Iceland and Norway are some of the other countries providing pre-populated forms.