New ITRs

Beware, the taxman is watching…

The Income Tax Department has introduced a new level of surveillance on high income groups. As per the new regulations, the IT Act is adding two columns in the new ITRs (ITR 2 and ITR 2A). Individual assessees earning more than Rs.50 lakhs per annum will have to disclose the value of their assets (both cost price and the market value) as part of their returns. This specifically applies to assets like yachts, aircraft, cars and expensive jewelry. So, in addition to disclosing details of immovable properties, individuals earning above the threshold of Rs.50 lakhs will be required to disclose their movable assets too.

An additional layer of bureaucracy!

 It is hard to see what the government is trying to achieve through this scheme but surely it will add one more layer of bureaucracy to the entire tax filing process. It is ironic because the last budget had focused extensively on simplifying tax related matters substantially. Now this is tantamount to taking one step forward and two steps backwards. The reasons are not far to seek. Firstly, today any individual is required to disclose their PAN number for any high value transaction. It is impossible to buy any form of jewelry without disclosing your PAN number. When it can be electronically tracked, what is the logic of asking people to make a disclosure of the same? Secondly, the IT department has attained a level of sophistication in its level of transaction marking, cross identification and tax mapping. Under these circumstances, this is tantamount to just adding one more layer of bureaucracy to the tax filing process.

Targeting the wrong audience…

As mentioned in the previous point, it is difficult to acquire assets without quoting your PAN number. Today with a little bit of sophistication and data mapping, an audit trail for most transactions can be easily established. But more importantly, the government is trying to target the wrong audience through this measure. Today there are thousands of middle level and upper level executives who are earning more than Rs.50 lakhs per annum. By any yardstick, this category of people can be classified as marginally upper middle class. To expect them to own yachts and aircraft is prima facie ludicrous.

Get back to keeping it simple…

The government has taken a great initiative in this budget by focusing on simplifying tax procedures. This is actually two steps backwards. The net outcome of the entire effort is likely to be marginal! A lot more can be achieved by focusing on mapping individuals and establishing an audit trail. Forcing an additional level of bureaucracy is again going to detract from the core idea of keeping it simple. The sooner this idea is abolished, the better it will be! ©

One thought on “New ITRs

  1. The government has taken this decision for good reason. Requiring PAN for a high-value purchase will take care only of recent and future purchases. There are many old-money families which for many generations have possessed aircraft, yachts and other items of high value without facing any compulsion or even need to disclose them. This new requirement will enable the government to list such possessions within the next year. When this has been done, the requrement may be withdrawn because quoting PAN when purchasing costly items will be enough for the government to update the list currently at all times.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s