Overview of Taxpayers Charter under the Income Tax Act

Taxpayers Charter under the Income Tax Act

Taxpayer Charter

Prime Minister Narendra Modi launched Taxpayers Charter under income tax Act on August 13, 2020, it pledges to protect income taxpayers’ privacy and confidentiality while also lowering the cost of complying with tax regulations. The income tax department’s commitments to income taxpayers, as well as what the agency expects from them, are spelled out in the charter.

The taxpayer charter outlines the government’s commitment to taxpayers.

• To treat others in a fair, courteous, & reasonable manner: In transactions with the taxpayer, the tax department will be prompt, courteous, and professional.
• Treat the taxpayer with respect: Unless there is cause to suspect otherwise, the income tax department will treat every taxpayer with honesty.
• To provide appeals and review mechanism: The tax agency must establish an appeals and review process that is fair and impartial.
• Deliver accurate and comprehensive information: The department must supply correct information in order to meet the government’s compliance duties.
• To make timely decisions: In every income-tax proceeding, the department must make a decision within the time limits set by law.
• Collect the correct amount of tax: The department is only responsible for collecting the amount required by law.
• To protect taxpayer privacy, the income tax department will follow the law and be as intrusive as possible in any investigation, review, or enforcement action.
• Hold its authorities accountable: The department is responsible for the activities of its officials.
• Allow taxpayers to designate an authorized representative of their choosing, the department must allow each taxpayer to do so.
• To safeguard confidentiality: Unless otherwise required by law, the department will not reveal any information submitted by the taxpayer to the department.
• Provide a system for filing a complaint: The department must provide a process for filing a complaint and ensuring its rapid resolution.

Types of bodies/units to be established under Taxpayers’ Charter.

The CBDT develops and gives scope for the development of certain technical organisations with the goal of ensuring the monitoring & regulation of the Taxpayers’ Charter scheme’s in-order occurring of events.

1) National e-assessment Centre (NeAC): This organization is responsible for centralizing the scheme’s events. The fundamental goal is to give jurisdiction in accordance with the charter’s stipulations.

2) Regional e-assessment Centers: These organizations are set up to undertake e-assessment of proceedings under the supervision of the Principal Chief Commissioner.

3) Assessment Units: As directed by the Income Tax Act 1961, these technical units carry out the functions of registering assessments for the identification of points or issues necessary for the determination of any responsibility.

4) Verification Units: These units are created to carry out the charter’s sole verification functions. These bodies conduct a variety of routine responsibilities such as document verification, cross-verification, inquiry, financial statement review, and so on.

5) Technical Units: These units represent the embodiment of giving technical support in the fields of information technology, legal, accounting, forensic, transfer pricing, data analytics, management, and other areas that may be necessary in certain situations.

6) Review Units: As the name implies, these bodies are in charge of assessing or reviewing the draught assessment order to see if the facts, relevant evidence, judicial decisions, and so on are described in line with it.

The Faceless Assessment Procedure

Since the National e-assessment Centre is the final approving authority in the Taxpayers’ Charter hierarchy, all orders, documents, validations, and other requests must go via it. After assessing a case, the National e-assessment Centre will use an automated allocation mechanism to allocate the case to an appropriate assessment unit for Regional e-assessment Centers. The National e-assessment Centre has the authority to do the following if a case is assigned to the assessment unit:

• Obtaining relevant information from the taxpayer, such as documents, evidence & validation;
• Passing the case to the verification team for an investigation or verification; and
• Admission of technical support from technical units within the appropriate horizon.

Framework for Mechanisms of Compliance under The Faceless Assessment Procedure

• Taxpayers can gain direct access to the Taxpayers’ Charter Cell under the Principal Chief Commissioner of Income-Tax in the chosen zone to put an appropriate check on the actions of tax authorities and to ensure that taxpayers’ rights are not exploited at the hands of tax officials.
• It’s worth noting that the government is likely to establish a directive body to oversee the activities of tax authorities in accordance with the Taxpayers’ Charter.

Summing Up the Faceless Assessment Procedure

• Income Tax Department is the apex body in charge of overseeing all of the implemented taxes and other supported horizons.
• Taxpayers’ Charter lays out all of the requirements for taxpayers and tax collectors, and ensures that an overall check is conducted on them on a regular basis.
• It would not be incorrect to argue that all of the charter’s mandates, obligations, and standards have already been incorporated into the legislation.
• The Taxpayers Charter can serve as a reminder that strives to raise knowledge about taxpayer rights and obligations in light of the new fiscal budget for 2020.
• It’s important to note that any human relationship survives on the openness of trust, sincerity, and loyalty of those involved. In plain terms, the charter’s ultimate goal is to foster confidence between the taxpayer community and the taxing administration.

How much money may you put in a savings account each year to avoid the income tax notice?

• The government has made it essential for banks, corporations, post offices, and NBFCs, among others, to provide the Statement of Financial Reporting (SFT) when transactions in a savings account surpass the prescribed threshold, according to tax experts.
• These activities include cash deposits and withdrawals, stock/debenture/time deposit/mutual fund investments, credit card expenses, foreign exchange purchases, and real estate transactions, among others.
• Banking businesses are required by law to record cash deposits and withdrawals of Rs 10 lakh or more in bank accounts other than current or time deposit accounts to the tax department on a regular basis throughout the year as part of SFT.
• This restriction applies to cash deposits of INR 10 lakhs or more in one or more accounts (other than a current account and time deposit) of the tax payer in a financial year. This allows the tax officer to inquire further about the source of cash, the nature of the receipt, and whether or not the proper taxes have been paid.
• Since cash transactions in a bank account totaling INR 10 lakhs or more in a financial year must be reported to the tax authorities, you must be cautious if you exceed the prescribed threshold. In case of current accounts, the ceiling is INR 50 lakhs or higher. Apart from cash transactions, there are a few other types of transactions that you should be aware of.

Statement of Financial Transaction Under Rule 114E of the Income Tax Rules, 1962 must be reported: –

• Every banking firm or cooperative bank that provides bank account services and is subject to the Banking Regulation Act of 1949 must record the following transactions:
  • A cash deposit of INR 10 lakhs or more in one or even more accounts (other than a current account and a time deposit) of an individual in a financial year.
  • Cash payments totaling INR 10 lakh or more in a financial year for bank draughts, pay orders, banker’s cheques, and prepaid documents issued by the RBI as per section 18 of Payment and Settlement Systems Act, 2007.
• The following transactions must be reported by a credit card issuing banking firm, a cooperative bank subject to the Banking Regulation Act of 1949, or any other company or organization.
• • A cash payment of INR 1 lakhs or more against a bill raised in relation to one or more credit cards issued in a financial year.
  • Payments of INR 10 lakhs or more in a financial year by any mechanism other than cash against a debt raised in respect of one or more credit cards issued.
• A company or institution that issues bonds or debentures is required to report the receipt of a payment of INR 10 lakhs or more from any person in a financial year for the purpose of purchasing bonds or debentures issued by the company or institution (except the amount received on account of renewal of the bond or debenture issued by the company).

 

Analysis of TDS & TCS

• Company is issuing shares must record receipt of an amount of INR 10 lakh or more from any person for acquiring shares issued by the company In a financial year.
• According to section 68 of the Companies Act, 2013, a company listed on a recognised stock exchange that purchases its own securities must report buybacks of shares totaling INR 10 lakh or more from any person during a FY (except shares bought in the open market).
• The receipt from any person of a sum of INR 10 lakh or more in a financial year for acquiring units of one or more Mutual Fund schemes (save amount received on account of transfer from one scheme to another of that Mutual Fund) must be reported by the Trustee of the Mutual Fund or other person who controls the Mutual Fund’s business.
• An authorized person as defined in section 2(c) of the Foreign Exchange Management Act, 1999, must disclose proceeds from any person for the sale of foreign currency totaling Rs 10 lakhs or more In a financial year.
• The Inspector-General appointed under section 3 of the Registration Act 1908, or the Registrar or Sub-Registrar, appointed under section 6 of the Act, must report any person’s purchase or sale of immovable property valued at INR 30 lakhs or more by a stamp valuation authority referred to in section 50C of the Act.

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