How simple is e-filing of Income Tax Returns?

Nachiket Barve

Electronic filing, or e-filing, of tax returns first clicked in India as part of a proposal for Web-based electronic tax administration system for service tax. Thanks to the Central Board of Excise and Customs, the e-filing of service tax returns commenced in April 2003 but its benefit was available only to a few service tax providers.

Considering the ease and the comfort for taxpayers across the country and also technology lending a helping hand, the both the Central and State governments decided to extend e-filing of tax returns to the other types of taxes, including income-tax, excise and VAT.

Under the income-tax law, this facility was introduced by the Central Board of Direct Taxes (CBDT) for the first time during assessment year 2006-07, wherein corporate assessees had to mandatorily e-file their income-tax returns.

At present, it is mandatory for companies and firms requiring statutory audit under Section 44AB to e-file their income-tax returns. Also, the e-filing benefit has been extended to all assesses except for trusts. What one needs to do first is create a personal login account at www.incometaxindia.gov.in. Then, download the requisite forms (ITR-1 to ITR-8) and key in the details.

Digital signature

The next step would be to upload the return to the department’s Web site with or without a digital signature. The return can be filed electronically with or without a digital signature. The Web site straight away generates an acknowledgement, if filed along with the digital signature. If there is no digital signature, the Web site generates a tax return verification form in ITR-V. Only this document needs to be signed by the assessee, as online authentication is not possible without a digital signature. Then send it via ordinary post only to the department’s Centralised Processing Centre (CPC) in Bangalore within 120 days of filing.

The CPC processes the return and sends the acknowledgement to the taxpayer’s email address. Alternatively, the taxpayers can themselves login to the Department’s Web site and check the return status.

The biggest advantage of e-filing is that one need not travel miles and wait in a queue outside the tax department but can e-file the returns from the comfort of his/her home or office and save valuable time. If the filing is with the help of a digital signature, there will be instant acknowledgement for the return.

Though the forms may be long, one can easily check the accuracy of numbers keyed in. This results in ease of submission for the taxpayer and ease of record-keeping and data-tracking for the Department. Providing accurate bank account details also helps in speedy grant of refunds as and when the return is processed by the department officials. Just in case the acknowledgement does not reach the CPC, it sends a mail before the stipulated timeframe for non-receipt of the ITR-V, which acts as a gentle reminder.

Pitfalls

However, this exercise may become an unwanted headache. It may so happen that the ITR-V that had been signed and sent across may have never reached the CPC, if sent via speed post or courier, thus tendering the return invalid merely because it was sent by a “traceable” source of transport. The taxpayer has no proof that he has successfully filed his return of income unless and until the post has actually reached the CPC and it sends an email in this regard.

There is no doubt that e-filing will turn out to be more beneficial in the days to come.

The Finance Minister in his recent Budget speech has proposed to set up two more CPCs to expedite the process. This is a welcome step towards greater transaction efficiency. Besides, the I-T Department is providing free return preparation utility to encourage e-filing of tax returns. The continuing expansion of personal computers and ease of access to the Internet will make the growth of electronic tax returns inevitable.

(The author is with PricewaterhouseCoopers)