ITR1 or Sahaj can be used in the ongoing return filing season for the assessment year 2019-20 only by residents and ordinarily residents with total income not exceeding Rs 50 lakh only so long as they have no capital gains and no business income either. All other individuals not in business must perforce use the 21 page ITR2.
ITR2's information appetite is gargantuan and voracious. It wants you to say how you were the resident in the previous year i.e. 2018-19---by being in India physically for 182 days or more or by staying in India for 60 days or more during 2018-19 as well as 365 days or more during 2014-18 i.e. during the four previous years preceding the previous year. This one calculation often makes the students in income tax classrooms as well as in the examination halls choke. One can imagine the plight of the filers uninitiated in the nuances of the income tax law. Many of them are flummoxed. Hey, I satisfy both they say, thoroughly confounded. Which one should I tick? But the software permits you to tick one of them alone though the vast majority satisfies both the alternative criteria of becoming a resident.
The moot question is why should the salaried persons be made to spend agonizing time in filling up the schedule relating to salary when all the information the tax sleuths need is already made available by their employers through their annual return on TDS on salaries? Why not simply spare the salaried persons of at least this burden if not from the burden of filing return itself? Isn't data filed by one (employer) not capable of being used against the employee to the extent it relates to him? In any rate, the onus is on the employer to deduct tax at source on salary.
Why should individuals having income in excess of Rs 50 lakh required to file details of assets when the simpler course would be to revive wealth tax even if does not yield much revenue so long as it facilitates juxtaposition of one's income with his wealth so as to enable the taxman to call the taxpayer's bluff? At any rate, the Annual Information Report (AIR) to be filed by bank managers, fund managers of mutual funds, sub-registrars of properties etc are meant to nab those who have been remiss in disclosing their income. CBDT would do well to use its staff more productively in analyzing the rich data thrown up by its analytics and reports rather than making the taxpayers stew in their own juices!
The icing on the cake is the disclosure required by ITR2 about 'unexplained' income. Isn't that something supposed to be unearthed by the tax sleuths or assessing officers? Sadly the CBDT expects the taxpayers to dig their own grave or stew in their own juices whereas what it should be doing is more legwork and data analysis. The municipal tax records are fecund sources of property information. The income tax officers can take a peek at them and select swanky houses to see if its occupants are income tax compliant or not. Ditto for RTO offices. A visit to them would beget rich information on swanky cars owned. Once again the tax sleuths can zero in on them to see if they are income tax compliant. The rich and the famous are often suspected to be tax evaders too. While they can hide their income through surreptitious means, they cannot hide their swanky cars and houses---two indicators of lavish lifestyle. Small wonder Columbia pioneered the idea of taxing people on the bases of their indicators of wealth rather than on actual income. CBDT can take a cue from this distant South American nation.
(The author is a senior columnist and tweets @smurlidharan)