Relief for taxpayers soon? ‘Faceless' income tax assessment mechanism to be made friendlier

| TOI Business Desk | TIMESOFINDIA.COM | Jun 26, 2024, 14:11 IST

Efforts are ongoing to enhance compliance and streamline the face... Read More

Income Tax Assessment mechanism to be more taxpayer friendly? The Indian government is currently evaluating the 'faceless' income tax (I-T) assessment system to enhance its taxpayer-friendliness, based on recommendations for improving the program's effectiveness.

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Introduced on April 1, 2021, the scheme was designed to minimize human interaction in tax disputes and assessments. Under this system, the income tax department handles return processing, refund issuance, tax assessments, scrutiny, and appeal management. Cases are randomly assigned to assessing officers, irrespective of geographical jurisdiction.

Sources familiar with the matter told ET that a hybrid approach is under consideration, which would allow taxpayers to choose between the faceless scheme and in-person resolution. "It is being reviewed to assess effectiveness," an official was quoted as saying. He also said that making it optional for taxpayers is a potential solution.

Another official mentioned that the aim is to tackle implementation challenges and further simplify compliance for taxpayers. The final decision will be made soon, the official added.

Income Tax Assessment

Although the video conferencing-based assessment system is considered stable, there has been an increasing demand from both individual and business taxpayers to allow some level of in-person interaction. Additionally, the income tax department's field formations have been advocating for a more hybrid approach to ensure optimal and effective resource utilization.

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Assessing taxes is a multifaceted process, and experts believe that interactive communication between the taxpayer and the tax officer can lead to more effective outcomes.

Also Read | Form 26 AS: Filing Income Tax Return? Know why Form 26AS is important & how to download it

Sudhir Kapadia, partner, tax and regulatory services, EY, said, "Especially in the case of large and complex matters requiring detailed explanations and huge amount of data to be produced, it has been observed that sufficient time has sometimes not been given for taxpayers to prepare and upload their facts and arguments, resulting in unwarranted adjustments."

Kapadia highlighted that when a case enters the first-level appeal process, it becomes part of a lengthy queue, contributing to the accumulation of pending cases at the commissioner of income tax (appeals) level, where the system faces its most significant hurdle.

"There is a crying need to expedite these long-pending appeals by prioritising cases, enabling technology support to the commissioner, and effective real-time monitoring of disposals by the CBDT (Central Board of Direct Taxes)," he emphasized.

Kapadia also noted that in the faceless system, there have been numerous instances of discrepancies between the portal of the jurisdictional assessing officer and the Central Processing Centre's systems. As a consequence, refunds remain stuck indefinitely without any resolution.

Also Check | Filing Income Tax Return For FY 2023-24? Form 16 To AIS - Top Documents Salaried Taxpayers Should Check Before ITR Filing On e-Filing Portal

Taxpayers have encountered issues while explaining the intricacies of their businesses to assessing officers via video conferencing, as the officers may lack the necessary knowledge or expertise, resulting in unfavorable orders. Tax experts have reported that startups and fund houses are particularly affected by this problem. Additionally, individuals have expressed similar concerns regarding virtual interactions.

Kuldip Kumar, a partner at Mainstay Tax Advisors, pointed out the lengthy duration of the process, stating, "For faceless appeals, there is currently a long pendency in disposal of appeals, even after submission of final response by taxpayers."

According to Akhil Chandna, partner, direct tax, Grant Thornton Bharat, "Taxpayers are facing certain challenges that need to be addressed to make the overall faceless scheme more effective." He highlighted difficulties such as the absence of a specific option for seeking adjournment, problems with uploading large files online, and insufficient time provided to taxpayers for responding to notices.

Income Tax Slabs FY 2024-25 Explained

Income Tax Slabs FY 2024-25: At the start of the new financial year 2024-25 from April 1, it is important for income tax payers to be cognizant of the income tax rates and income tax slabs that are applicable to them - both under the new income tax regime and the old income tax regime. It is also important to remember that effective FY 2023-24, the new income tax regime has become the default income tax regime. Hence if you wish to opt for the old tax regime, you will have to tell your employer at the start of the financial year so that your income tax outgo is calculated accordingly. We take a look at the income tax slabs for FY 2024-25 (AY 2025-26):

Income Tax Slabs 2024-25 Old Tax regime: For the financial year 2024-25, the income tax slabs and rates in the table apply to individuals, including residents below 60 years of age, non-residents (NR), and non-ordinary residents (NOR).

Income Tax Slabs 2024-25 Old Tax regime: Resident individual taxpayers with a total income not exceeding Rs 500,000 will be eligible for a tax rebate of Rs 12,500 or the actual tax payable, whichever is lower.

Income Tax Slabs 2024-25 Old Tax regime: It's also important to note that for resident individuals who are senior citizens aged 60 and above, the basic exemption limit is Rs 3 lakh, while for super senior citizens aged 80 and above, the basic exemption limit is Rs 5 lakh.

Income Tax Slabs 2024-25 New Tax Regime: The income tax rates and slabs for the financial year 2024-25 under the new income tax regime, also known as the Concessional Tax Regime are mentioned in the table.

Income Tax Slabs 2024-25 New Tax Regime: In the new income tax regime, the rebate eligibility threshold is set at Rs 7,00,000, allowing taxpayers to claim a rebate of up to Rs 25,000. Moreover, marginal relief remains available for resident individuals with a net taxable income exceeding Rs 7,00,000, where the incremental income tax liability surpasses the incremental income above Rs 7,00,000.

Income Tax Slabs 2024-25 surcharge rates: Individuals will face a surcharge on their income tax if their total income exceeds Rs 5,000,000. The surcharge rates under the old and the new tax regime are mentioned in the table.

Income Tax FY 2024-25: A health and education cess of 4% is applied to the income tax and surcharge (if applicable) calculated based on the mentioned rates, applicable to all individuals.

Income Tax Slabs 2024-25 New vs Old Regime: The basic difference between the old and new income tax regime is that the former allows for major exemptions and deductions such as Section 80C, Section 80D, Section 80TTA etc. Those opting for the new tax regime can avail lower tax rates depending on the slab they fall under, but the only major exemption available to them is standard deduction.

Income Tax Slabs FY 2024-25 standard deduction: Since no changes were announced in Interim Budget earlier this year, the standard deduction for the financial year 2024-2025 remains unchanged. It will stay at Rs 50,000 for both the old and the new income tax regime.

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