Appraisal of the new e-filing portal
On July 24, 2022, I posted a brief write-up on LinkedIn (shared with Twitter and Facebook groups) in which I questioned the need of spending ₹ 164.5 cr. for a new portal for e-filing of income tax returns (ITRs). The reaction was mixed. While some readers including retired officers of the IT department agreed that the previous portal was more user-friendly, quite a few said that they faced no difficulty in using the new portal. I faced criticism too for calling this expenditure “a scam”. A few readers justified the new portal as it enabled the government “to collect more information about financial transactions.”
A chartered accountant (CA) shared his frustration on LinkedIn:
“I am trying to file form 10BA since last 4 days on continuous basis but no results even data filled is not getting saved . Department says please do email to official but no-one knows when they will reply the mail.”
Two days later, in another post, I replied to my critics that while working in the government I had seen many unnecessary projects submitted by or under the pressure of vested interests.
I am not questioning anyone’s opinion or experience. Anyone having income from only one or two sources, say salary and/or interest, is unlikely to face any problem. Problems may arise only when there are more sources of income. Anyway, I am just attempting an appraisal base on my personal experience as a case study.
The new portal, launched in June 2021, has to be appraised in conjunction with the new Form 26AS and the Annual Information Statement (AIS), the two new features announced during the last two years.
The CBDT vide Notification dated May 28, 2020, introduced new Form 26AS (under Sec 285BB of Income Tax Act). It contains more information than its predecessor:
“mobile no., e-mail id, date of birth/incorporation, and Aadhaar No.; information relating to tax deducted/collected at source, specified financial transactions (SFT), payment of taxes, demand and refund, pending proceedings, completed proceedings, information received by the Department from any other country under the treaty/ exchange of information about income or assets of the taxpayer located outside India and one more item.”
14 types of SFTs are required to be mentioned (each with a specified threshold monetary transaction) are:
“Cash payment or issuance of DD or Pay orders or any other bank instruments; purchase of prepaid instruments in cash; cash deposit/ withdrawal in the current account; cash deposit in one or more accounts other than a current account and time deposit; time deposit (other than a time deposit made through renewal of another time deposit); payment for a credit card; purchase of debentures; purchase of shares (including share application money); buyback of shares; Purchase of mutual fund units; purchase of foreign currency; purchase or sale of immovable property; cash payment for goods and services; and cash deposits during the specified period.”
SFT is not a new provision. In 2003, Section 285BA was inserted in the Income Tax Act to provide for ‘Annual Information Return’. The Finance Act, 2014, replaced it with an ‘obligation to furnish statement of financial transaction or reportable account.’ However, only in June 2020 i.e. one year before the launch of the new portal, the department revised Form26AS to include SFT.
All instructions and guidelines issued by the department suggest: login to https://www.incometax.gov.in, go to e-file menu, select Income Tax Return and click ‘View Form 26AS’. E-file menu directs to https://eportal.incometax.gov.in to which one can go directly but that is a minor issue. Around the 20th of July, I tried to download this form from eportal. I was directed to the Traces (TDS Reconciliation Analysis and Correction Enabling System) portal. When I clicked on to see the form, I saw just gibberish:
In the past, I had never seen anything like this. Of course, I logged in to www.tdscpc.gov.in/app/login.xhtml and downloaded the form for the FY 2021- 22. Since then, I have tried a couple of times to download from eportal. Either there is no response or gibberish is downloaded.
On July 30, I shared a video of the entire process with a Facebook group. One of the members replied, “It is working. The only problem I see is the amounts are available in 26AS, still, the portal shows them as credit mismatch.”
If it is showing “credit mismatch”, it is because of glitches.
Form 26AS I downloaded from ‘tdscpc’ is not according to the above-mentioned CBDT notification. It does not contain mobile No. or Aadhaar No, shows the incorrect amount of dividend received from a company, and in Part E (Details of SFT transactions), it says “No Transaction Present”, I had purchased and sold equity shares and units of mutual fund in the financial year though.
Annual Information Statement (AIS)
In November 2021, the Department rolled out the new Annual Information Statement (AIS) that can be downloaded from eportal. According to the department, it is much more comprehensive than Form 26AS as it includes:
- TDS/TCS Information – Information related to TDS/TCS;
- SFT Information – Information received from reporting entities under Statement of Financial Transaction (SFT);
- Payment of Taxes – Information relating to taxes such as advance tax and self-assessment tax;
- Demand and Refund -Details of the demand raised and refund initiated (AY and amount) during a financial year; and
- Other Information: – Details of the information received from the other sources, such as data about salary, interest on refund, outward foreign remittance/purchase of foreign currency, etc., is displayed here.
According to a digital brochure issued by the department on July 20, 2022, “AIS carries your financial transaction details of a financial year. AIS helps in filing the appropriate form.”
When I download it, I found that the dividend income mentioned in Part B-1 was the same as in Form 26AS (Rs. 50,202), less than what I had received. I downloaded it again after my CA had shared the first ITR filled by him, to recheck. This time, I got information in greater detail (perhaps, meanwhile it had been updated) but again full of mistakes and omissions:
- The dividend income shown was Rs. 61342/-, still less than what I had received.
- Interest from Savings Bank accounts was missing.
- The value of sales of shares and units of mutual funds shown was wrong, less than the actual.
Of course, the department says that an assessee can furnish feedback for correction. Easier said than done. With a large number of transactions for the purchase and sale of securities, it will take several hours of tiring effort to do that. No CA or professional who helps file returns will be able to do so. Everyone has hundreds of clients. It will take months to make corrections, and submit feedback and there is no guarantee of getting corrected details.
In any case, purchase prices and values of sales captured in AIS are of no use in the calculation of short-term and/or long-term capital gains/loss. Shares purchased in a financial year are not necessarily sold in the same year. Shares sold in a financial year were not necessarily purchased the same year.
I fail to understand how AIS “helps in filing the appropriate form”, as claimed by the department.
Moreover, is no rationale for including data in AIS, already included in Form 26AS. It is unnecessary duplication.
My experience of e-filing ITR2
When the new portal was launched in June, last year, the department described it as ‘user-friendly for filing of returns and will afford greater ease to the taxpayers’. Readers may recall that soon after the launch, Finance Minister Nirmala Sitharaman went on record that she had received several complaints about numerous glitches. More than once, Infosys, the developer of the new portal, was asked to remove the glitches. Perhaps, the process is continuing because I saw new announcements on the portal even in July 2022.
I have always prepared and filed returns without anyone’s help, first manually and then online. Even for the assessment year 2021-22, despite reported glitches, I succeeded after a couple of attempts.
True, JSON is becoming popular because it is faster. It is faster because it is designed specifically for data interchange. requires less processing time and memory overhead. However, it has limitations. Its transformation capabilities support only the most basic of data conversions, not complex, and when verification of correctness is not required. The experience that I have shared here confirms its limitations. I have experienced wrong as well as the incomplete transfer of data to Form 26AS as well as AIS. Only software engineers can say whether the JSON is the right choice for Form 26AS, AIS, and e-filing and JSON schema (logical description of the entire database) version adopted is right or not.
Earlier, when a filer used the excel-based utility for off-line preparation of ITR, the entire ITR was downloaded on the computer. The filer would fill in the necessary data on every page (applicable to the filer). Every page had a button to validate. If there was any omission or mistake, the ‘utility’ pointed it out. The page would be validated only when there was no omission or mistake. After validation, the filer saved the page and moved to the next page. One could fill the return in one sitting or several sittings. The saved ITR could be opened anytime. After the return was completed, tax still due paid, and the return finally validated, the filer was required to convert it to XML format for uploading on the IT website.
Under the new system, the entire ITR does not appear on the computer screen. One has to click on the page to be opened. There is a facility to fill a return in several sittings but each time the work of filling further is resumed, the filer has to attach a JSON file. Without experience or guidance, most of the filers may not know how to do that. The saved file in JSON format is automatically downloaded to the computer to be attached.
Unfortunately, the new utility does not have a button to validate the filled page. There is a button on each page only for “confirmation” of what has been filled, correctly or wrongly. Only at the end, the system gives a list of errors. Again, without experience or guidance, most of the filers would not be able to remove those errors.
As in the past, I opted for offline utility. After getting prefilled data, I proceeded page by page, entering data wherever necessary. When I reached “income from other sources”, I was shocked to see that according to the prefilled data, my income from dividends was shown as Rs 1,07,717/-. During the financial year 2021-22, I had received a dividend income of Rs. 62075/- from shares. I have mutual funds but did not receive any dividend during the financial year because I had switched over to the growth option.
When I checked the AIS, the dividend income mentioned was Rs. 50,202/- (same as in 26AS i.e. dividend income from which tax was deducted at source), less than what I had received.
Though I had no doubt that my dividend income was Rs. 62075/- (every receipt was credited to my bank account), not Rs 1,07,717/-, I looked into my previous records. One problem that I faced in arriving at the correct dividend income declared (nothing to do with the portal) was that in the financial year 2020-21 and before that when I had investments in the dividend-paying mutual fund, one of the funds (Axis Mutual Fund) had declared dividend but not paid. Instead, on its own, it had used the declared but unpaid dividend to purchase units of the fund. When I insisted on payment, Axis MF sold those units in the financial year 2021-22 (on which I have paid capital gains tax). In the assessment year 2021-22 (the first AY in which dividend income became taxable), I had offered for taxation even the dividend income declared but not paid.
After thoroughly examining my records, my conscience was clear that the actual amount of dividend income was Rs. 62075/-, not Rs. 1,07,717/-, as indicated in the prefilled data or Rs. 50,202/- as shown in AIS. Despite this, I decided to pay tax on Rs. 1,07,717/- because of the fear, right or wrong, of notice of concealment and the consequent harassment. I feared that if I could not convince the assessing officer that my calculation was correct, I might have to pay tax as well as penalty unless I appealed and got relief. At this age (I am already 81+), I would not be able to handle all this without the help of a legal representative.
After due deliberation, I paid self-assessment tax on Rs. 1,07,717/- plus savings bank interest (less TDS)
I completed the return. After the final validation, I was shocked to see a list of nine errors in the ITR. I could rectify a few but not all.
I decided to try the online option. The option has the facility to save partly filled return and resume at convenience but here also there is no button to validate. Halfway through, i.e. after spending considerable time, I decided to take the help of a CA because of the fear that I might face the same problem, confronted with a list of errors all of which I would not be able to rectify. The last date of filing the return was only 6 days away.
I told my CA that he should share the duly filled ITR before uploading. In the first draft received from the CA, Schedule HP was incomplete. The prefilled data contained only Serial Nos. 3 and 4. More surprising was that according to the prefilled data dividend income was Rs. 61,342/-. I have not been able to understand how it came down from Rs. 1,07,717/-. Anyway, it was less than the actual amount i.e. Rs. 62075/-.
Now, I had four options. I felt I was sitting in the “hot seat” on the stage of “Kaun Banega Crorepati” and was being asked, which option was correct.
I asked my CA to recheck the amount of the dividend.
After rechecking, he sent another draft ITR. It was the same as the earlier one. Schedule HP was still incomplete.
I advised him to enter the correct dividend income (Rs. 62075) and to ensure that the Schedule HP was complete. After a few attempts that must have been very tiring and time-consuming, he succeeded in downloading prefilled data with a complete HP Schedule. At long last, on July 26, the return was uploaded, and I received acknowledgement.
My questions are:
- How can the IT department claim that the new portal ‘is user-friendly for e-filing of returns and will afford greater ease to the taxpayers’? It is less user-friendly than the previous one.
- Was it necessary to demolish the old portal and develop a completely new portal?
- Considering the mistakes and omissions noticed, can Infosys claim that it has provided the JSON was the right choice and whether the version adopted is the right choice?
- Is it necessary to include SFT in Form 26AS and to include in AIS the items already included in Form 26AS?
- Is not the new portal tax professionals’ paradise?
My suggestions are:
- There should be a review of the new portal by qualified and experienced software engineers.
- Whether a filer opts for an offline or online mode of filling ITR, a complete form with a button on each page to validate should be downloaded.
- Duplication should be avoided. There is no need to have SFT in Form 26AS. Similarly, there is no need to include in AIS information about taxes, etc. included in Form26AS.
- The portal should provide a facility for individual filers as well as professionals to share the shortcomings/problems they have faced or are facing and mandatory resolution of the problems within 24 hours.
My experience reminds me of a Hindi verse by Rashtrakavi Maithili Sharan Gupt:
“परिवर्तन ही यदि उन्नति है, तो हम बढ़ते जाते हैं,
किंतु मुझे तो सीधे-सच्चे पूर्व-भाव ही भाते हैं।।“ (“पंचवटी” से)
(If change is progress, then we keep on moving forward but I like straightforward expressions.)
Devendra Narain, IRS(Retd)
(Former head of the Project Appraisal Division of the erstwhile Planning Commission)
August 4, 2022