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Income tax which plays a vital role in revenue collection of Government of india. Every assessee need to do tax planning so as to save taxes legally and within the rules framed by the Act. But many people instead of doing tax planning, use tax avoidance techniques and that hampers the revenue collection of the government. I have a suggestion about the income tax return forms. My suggestion is on account of various tax avoidance techniques used in the market by many professionals, How can the taxpayers or Chartered Accountant, for that purpose, would not make fool government by taking inadmissible deductions !!
Many CA or tax consultants, in order to make their clients happy and satisfy, by their service, does apply tax avoidance techniques, that is mainly in form of availing unfair deductions. These professionals or assessee are not afraid of tax department, just because they need not attach any evidence or any document to avail such deductions ( viz. Chapter VI-A deductions). It means they can take any amount of deductions permissible under respective section, without being eligible for it. Hence, many assessee receives tax refunds along with interest from department, where they should not !!
Obviously, there is debit to the account of government without any payment due as such towards assessee. But I think, we can conquer this problem in a simple way. Government can keep mandatory field in income tax return form for attaching the Evidence / document for deduction availed and only after verification and processing such documents, government should credit the amount of refund to the account of an assessee. That would be much beneficial to government.
Following are the merits of such change:
- There will be transparency in the income tax return.
- Tax avoidance techniques will creeped out.
- Government will save their money.
- In order to save tax, there will be boost in insurance sector, mutual funds, pension scheme by government and
various investment options eligible for deduction.
By considering above-mentioned merits, government should revise income tax return forms for subsequent financial years.