Simplify ITR forms, bring 'one rate one section' for TDS: Deloitte survey

A vast majority of income tax filers want simplified ITRs for individuals, easier way for computing incentives and deductions, and simplification of TDS framework for ‘one rate one section’, a Deloitte survey said on Wednesday.

Deloitte’s Income-Tax Policy Survey also suggested doing away with the requirement of issuing Form 16A as the TDS information is already reported and available in the Form 26AS and AIS of the recipient.

The survey also suggested limiting the number of sections with regard to withholding tax, classifying payments into two-to-three distinct and non-overlapping categories, and ensuring that each section has only one rate, which will significantly reduce the burden of compliance without any major loss in tax collections from a tax administrative perspective.

For example, 1 per cent TDS on tangible goods, 2 per cent on services, 0.1 per cent on e-commerce transactions, and 10 per cent on other transactions such as dividend and interest.

The Income Tax Policy Survey involves an online survey of over 320 industry professionals in organisations across multiple industries, including C-suite, directors and presidents from the finance and tax functions; general managers (finance/tax), and vice-presidents (finance/tax); as well as finance and taxation managers.

A vast majority of respondents (76 per cent) rooted for simplification in computing incentives and deductions, reflecting taxpayers’ concern in understanding and computing eligible incentives/deductions.

Nearly three-fourths (73 per cent) of respondents advocated for simplifying the computation methodology of the fair value of assets and other property as well as the computation of foreign tax credit.

Ease of preparing and filing individual ITR forms is a major ask, supported by nearly 74 per cent of respondents, while 71 per cent sought to simplify ITR forms for corporates.

For 73 per cent of respondents, simplification of the tax audit report is a major ask, indicating a high level of complexity and compliance burden.

About 68 per cent of respondents laid emphasis on the requirement to ease preparing and filing of TDS/TCS returns.

Deloitte also suggested that as a simpler income tax law is in the works, the government should avoid the use of provisos and instead, the text could be integrated into simple sentences so that the reader can understand its logical function better.

The effectiveness of the tax law can be significantly enhanced if the words used are meaningful, well thought out, and well organised.

For example, several related sections, perhaps located in different parts of the statute, could be combined into one chapter, Deloitte said.