Wish, New ITR Forms Had Stayed!

                         WISH, NEW ITR FORMS HAD STAYED!

                                                                    By MEENAKSHI SUBRAMANIAM
                                                                                    Former IRS officer
1.0Introduction

Once a thief said; "I went to a house, where the people had put up a trap. But, I dug a hole underneath and escaped."
The second thief said: "I reached this house, where the people erected a trap. But, I ran away with the trap, itself."
The second kind of trap reminds one of the recent Government's decision of altering ITR forms, for purpose of unearthing black money, only to backtrack the very next day. The volte face has allowed black money owners to scamper away with the trap.

The Government decided to roll back the changes in ITR forms, after tax experts and taxpayers raised a loud protest vociferously contesting the move. The new ITR forms wanted assessees to disclose foreign trips, bank accounts, financial interests, trusts outside and property abroad, among other things.

For the first time this Government had moved beyond penalties, in black money cases, by seeking to arm income-tax officers with prosecution powers. But now the idea is being quietly dropped.

Those who have nipped the changes in the bud, did not proceed to think about the backdrop of the alterations. The changes in ITR forms were made, based on recommendations of the Special Investigative Team (SIT) on black money. The new ITR requirements about assets abroad was necessitated, as the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill was passed recently.
A few years ago the Swiss Bankers Association revealed that 80,000 Indians travel to Switzerland every year. Out of them 25,000 undertake frequent trips. Surely, they were not tourists.

2.0THE CHANGES WHICH COULD HAVE BEEN AFFECTED…
To rope in black money beast, ITR-1 and ITR-2 were sought to be amended, so that significant details could be gathered from taxpayers.

ITR-1 (Sahaj), as everyone knows, is filed by individuals having salary/pension, one house or other sources of income, like rent, interest or taxable dividends (excluding lotteries, etc.). The changed ITR forms required that bank account details should be given, by taxpayer. The bank account number, type of account (whether current or savings), IFSC (Indian Financial System Code) were to be mentioned. The balance money in account, as on March 31 had to be declared. The ITR form also required that bank accounts opened or closed during Previous Year were to be mentioned.

ITR-2 is filled up by both individuals and HUFs having salary, houses, capital gains or other sources of income (including lotteries, etc.). The changed ITR forms required that foreign trips undertaken during the Previous Year had to be clearly stated. The taxpayer had to fill in names of countries visited, number of times travelled and expenses borne out of own pocket. Besides, the passport number had to be entered in, alongwith place of issuance.

The amended ITR Forms wanted taxpayers to give details of foreign bank accounts, property or assets outside India, trusts created abroad and financial interests in offshore countries. For example, the address of trustees, beneficiaries and settlers had to be disclosed in the income-tax return.
The new ITR Forms also wanted that taxpayers to give agricultural income details like gross receipts, expenditure and adjustment of losses in the last 8 years.

The forms were of 14 pages and were applicable from current Assessment Year 2015-16, that is , details of last year, 2014-15 had to be furnished.

3.0THE SPOILSPORTS
Those agitated by new ITR forms had trotted out the excuses that the whole process was very cumbersome, as it involved a lot of paperwork. The tax experts feared that the government was seeking too much data. It was cumbersome to keep details of official visits. How could a company provide details, if the employees left mid-way? The government was expecting too much, by asking taxpayers to give account of pleasure trips. The changes would give income-tax officers powers to harass taxpayers.

Other amazing excuses were that those taxpayers, who had relatives abroad would face difficulties. Business executives, who travelled frequently would be in a soup, too.
Sullen tax experts had pointed out, that the income- tax office could well know from the passport authorities, how many times a person had travelled abroad. Why ask the taxpayers to give such details? Similarly, bank account information was available, with income tax department. Then why should taxpayers be asked to mention facts?

4.0WHY ITRs NEEDED BOOSTER SHOTS
"Introduced today, revised tomorrow," is surely not the way to catch black money holders. The changes, if allowed to last, could have ensnared a lot of dangerous fish. After all, what was needed? The taxpayer had just to type a few lines more, in income-tax returns. Considering that a lot of fuss was being kicked up regarding not bringing black money back, this was a little effort that could have been put in by all taxpayers.
As stated by income-tax authorities, the changes in ITR forms were to help tackle black money in an unobtrusive manner. Instead of rigorous search and seizure methods, this simple act could have avoided a lot of trauma for taxpayers. The new ITR changes could have also added to knowledge of income-tax officer, about his assesses, as the Department said.

The ITR forms could have tamed the black money beast, in a comprehensive manner. Instead of just foreign income, the returns would have disclosed foreign assets too.
The income-tax department could have matched income and tax paid with inflows and outflows, by scrutinizing the returns. From bank accounts, investment avenues here and abroad could have been gleaned. The names of joint bank account holders could have made things easier for tax authorities. How many bank accounts were opened and closed would have made vital information.

Bonafide foreign trips, in which employees spend money advanced by employers were not questioned in the new ITR forms. There were only extraordinary personal splurges that were sought to be purged. If a person was travelling to tax havens like Mauritius too many times, he could be pounced upon, with the ITR info, if the returns had been allowed.
Beneficiaries, beneficial owners, financial interest holders, voting power wielders, equity interest owners could have easily been netted in as the ITR forms had insisted on furnishing these details. The addresses, income derived and nature of income would all have been revealed. For the first time trusts abroad could have been checked in.

The black money cases revealed, could have been sustained, as there would have been written proofs, which could have held then own in a court of law.

Many times people approach local dealers abroad for foreign exchange conversions. The government of India loses a lot of money this way. But, if money spent abroad, from own funds was listed in income tax returns, this drain on exchequer could be stalled.

For honest people, who have a simple bank account and who go on holidays abroad, once in a while, there was nothing fearsome about the new ITR forms. It's only the crooked elements, anxious not to disclose their hideouts, who were trying to trash the new changes.
Of course, the income-tax department has a database to undertake 360 degree profiling of assesses, by clinching information from PAN and credit/debit card usage. But, why should the income-tax department depend on immigration department or banks, when it has to nab criminals? If all information is right there in front of an officer, he can act swiftly and accurately, in crusade against black money. After all, why trouble the passport and bank authorities, who have their own duties to do? Being citizens, genuinely concerned about black money, would a little act like filing an income- tax return once a year, be that cumbersome?

According to Global Financial Integrity report, India lost $95 billion to illicit outflows of black money last year. Overall, the country became poorer by almost a trillion dollars, owing to black money dealings, both inside and outside the nation.

5.0CONCLUSION
An American management professor, Jonathan Westover once said, "We have a chance – to plow new ground or let the weeds grow." To catch black money, there is an urgent need for bold measures. By changing ITR forms, just to quell the noise would not help the crusade against black money. The Issue needs to be de-hyped. Grouses should not have been entertained

It took 20 years for US citizens to learn e-filing of returns. Here it has taken just 5 years. So, why to create great fuss for few more details to be entered? But, no. There is now an exercise to review and simplify the ITR forms. Perhaps, the government should remember an ancient saying:" Making the right decision is hard, but it usually turns out to be right. Making the wrong decision is easy, but it usually turns out to be wrong. "

Source : taxmann