Explained: India's New Income Tax Reforms Like Faceless Assessment, Appeals For More Transparency And Compliance

Prime Minister Narendra Modi today (13 August) launched the ‘Transparent Taxation, Honoring the Honest’ platform said the ongoing structural reforms have "reached new heights today" and will strengthen efforts of "reforming and simplifying our tax system".

“..a transparent efficient and accountable tax administration is what this platform brings in. It uses technology, data analytics, and also uses artificial intelligence... It eases compliance burden, it brings in fair objective and a just system, there shall not be any physical interface between the department and the tax payer and to an extent it shall bring in certainty of Information," Finance Minister Nirmala Sitharaman said.

Faceless Assessment & Faceless Appeal

In this year’s budget, Finance Minister Nirmala Sitharaman had talked about a faceless electronic assessment system to minimise human interface. This will reduce harassment and opportunities of corruption.

The returns for scrutiny will now be flagged with the help of tools like data analytics and artificial intelligence. The cases may also not be scrutinised in the same territory as that of the taxpayer and may be randomly assigned to locations outside the taxpayer's city.

The taxpayer will also not be required to visit the Income Tax office or the officer during the course of the assessment. Additionally, in a bid to further reduce potential harassment of the the taxpayer, the assessment draft, review and finalisation will be carried out by different teams in different cities.

The platform also provides for ‘Faceless Appeals’, wherein the taxpayers will be able to file appeals digitally from 25 September onward.

This faceless assessment scheme though is not applicable for serious frauds, sensitive matters and major tax evasion.

Taxpayer Charter

In her budget speech in February this year, Finance Minister Nirmala Sitharaman had announced a 'taxpayer charter'. She said that the charter will ensure trust between a taxpayer and the administration and reduce harassment, as well as increase efficiency of the department.

Union Minister of State for Finance & Corporate Affairs Anurag Thakur shared infographics regarding the taxpayer’s charter.

Widening the tax base

While the tax base has increased by 2 to 2.5 crore people in the last 6-7 years, given the population of the country at 130 crore, it is still not enough.

The government also launched several measures to widen the tax net, including increasing the scope of the transactions to be reported.

Direct Tax Reform