Revenue panel backs scrapping of tax form for the salaried

Taxpayers could soon heave a sigh of relief if the Standing Committee set up under the Department of Revenue, Ministry of Finance is able to push through its recommendations on tax filing procedures applicable from assessment year 2007-08

Taxpayers could soon heave a sigh of relief if the Standing Committee set up under the Department of Revenue, Ministry of Finance is able to push through its recommendations on tax filing procedures applicable from assessment year 2007-08 (financial year 2006-07).

The Committee, in its 41st report, has taken exception to the Department’s claim that furnishing a cash flow statement would not entail the need to maintain complicated accounts. The report asserts that the cash flow statement has created confusion and apprehension among asssesees. It further states that since only 2 per cent of returns filed by the salaried class are, by the Department’s own admission, subject to scrutiny, the committee finds it unnecessary to include cash flow for the remaining 98 per cent deemed honest taxpayers.

It might be recalled that the ministry had introduced a series of forms for various categories of non-corporate taxpayers. The trouble with some of these forms – especially Form 2F, applicable to the salaried class – is the quantum of information they seek, more specifically the controversial cash-flow statement, which seeks explanations on expenses taxpayers make from their net income after taxes. The report states that once income is taxed, its use by the assessee should not be of any concern to the tax department.

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Earlier, all categories of salaried taxpayers were used to filing returns in Form 2D. But with the introduction of Form 2F, this category has been split into two, and those taxpayers with capital gains, agricultural income and/or more than one house property can file in Form 2 or Form 2D.

The committee says this complicated the tax filing procedure, and adds that the existing Form 2E (Naya Saral) can be expanded suitably to take care of the space issues cited by the department while evolving the newer forms.

The sum and substance of the committee’s argument is that the new forms have only made returns filing procedure more complicated for a class of assessees that is not yet suitably equipped to file returns online. It is particularly unconvinced about the need to include the cash flow statement, and recommends the scrapping of Forms 2, 2F and 3 in order to “serve the taxpayers in a befitting manner”. In short it calls for the reduction and rationalisation in the number of forms.