The best way to ensure
statutory compliance is to make the process as simple as possible, so that the
person who has to comply with the law, finds it less burdensome to comply with,
rather than undergoing penalty for non-compliance. Unfortunately, as witnessed
by the recent amendments in tax deduction at source (TDS) procedures, the CBDT
is seeking to make compliance so cumbersome that it makes the compliance
extremely onerous, if not impossible for most tax deductors.
All these years, the CBDT has
failed miserably in its attempts to ensure that there was proper compliance with
TDS provisions, and that tax collection by way of TDS matched with tax credit
given for TDS. This was on account of the complicated and ambiguous provisions,
which made the law difficult for most tax deductors to understand, and the
manner in which the law was administered, with many tax officers not fully
conversant with the correct provisions of law. Poor tax administration caused
revenue leakages in the system.
Realising that it was unable to
set its own house in order, the CBDT now seems to be going to the other extreme
of casting the entire burden of creating the data, on the tax deductors. This is
acceptable to some extent, given the benefits of computerisation that would flow
to tax deductors and deductees. But the extent of compliance being cast now
makes it so onerous, that it would require almost every business to hire
additional people to comply with such requirements, the total number of people
required probably exceeding the size of the entire Income Tax Department.
The requirements of Form 24C
seem to reveal a mindset of the CBDT, that businesses are in existence only to
comply with the requirements of the tax authorities. It would be almost
impossible to compile the monthly data in the manner sought. Just to give an
example, details of total payments to contractors during the month have to be
given, including those from which taxes have not been deducted. Payments to
contractors may be debited to printing & stationery, travel & conveyance,
advertisement, staff welfare and dozens of other accounts. To identify and
compute the monthly value of such payments and others every quarter would
involve more work than that required for filing the return of income !
Is this a financial stimulus
package being thought up of by the CBDT to create employment ? It will certainly
have the opposite effect, as businesses already suffering from eroded
profitability will not be able to bear the burden. Maybe taxes could be reduced
on businesses to ease the burden, by reduction of the size of the Income Tax
Department, given the extent to which its functions are being outsourced.
The increasing scope of
mandatory e-payments and e-filing also makes one wonder whether the CBDT is
aware of the ground realities in this country, where most places do not even
have continuous electric power to run their computers, or where internet
connectivity is often irregular. Outside Mumbai, one often hears narratives of
how all details were filled in and payment or uploading was about to be done,
when there was a power or internet or website failure, necessitating initiation
of the entire process again after power or connectivity was restored.
Only 30 banks permit e-payment
of taxes. What about those deductors who have their accounts with other banks ?
Many people prefer not to have internet banking, on account of their fear of
fraud.
Under such circumstances, it
would perhaps have been far better to make e-payments and e-filing optional
rather than mandatory. The least that one would expect is to keep such e-payment
or e-filing as simple as possible, so that it is easy to comply with, given the
constraints that we suffer from.
The worst part of the
amendments is the new rule 37BA providing that credit for TDS would be granted
on the basis of the returns filed by tax deductors and reflected in the TIN
system, instead of on the basis of TDS certificates. Today, it is well-known
that on account of various flaws in the system, the credit appearing in the TIN
system rarely reflects more than 50% of the TDS deducted from a taxpayer as
evidenced by TDS certificates. The major culprits for such failure are
nationalised banks and Government Departments, which do not comply with the
requirements or do so incorrectly. There is no provision for a taxpayer to
penalise or force a tax deductor to file his TDS returns correctly. When the tax
authorities, with their powers to penalise and prosecute, have not been able to
enforce proper TDS compliance, how can a mere taxpayer without any powers ensure
this ?
Such a provision amounts to
cheating a taxpayer of the legitimate taxes contributed by him, for no fault of
his. It amounts to expropriation of taxpayers’ money by the Government over and
above the taxes that it has recovered. One understands that even today, a
sizeable amount of taxes paid to the Government has not been credited to
accounts of taxpayers but is lying in suspense, on account of incorrect PAN,
other details, etc., mentioned by tax deductors or banks. The CBDT cannot escape
its responsibility to come out with a better scheme to ensure that every
taxpayer gets credit for all taxes deducted from his income, besides all taxes
paid by him.
Gautam Nayak
