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While not quite the two-pager Saral was, the new form is more straightforward and user friendly In his budget speech, the finance minister had indicated that to make the tax filing process simpler, the erstwhile Saral is set to make a comeback. True to his word, on April 23, the Central Board of Direct Taxes has notified Saral II. While not quite the two-pager that Saral was, Saral II is far more straightforward and user friendly than its earlier avatar.

Saral II (ITR-1) is to be used only by a specific taxpayer group - individuals having income from salary/ pension/ income from one house property (excluding loss brought forward from previous years)/ income from other sources (excluding winning from lottery and income from race horses).

In other words, those who earn a living only from salary, pension or interest income may use this form. Even within this group, owning more than one house makes one ineligible. These are, I think, a bit over the top and unfair conditions. Everyone, whether salaried or otherwise, saves a portion of their income. These savings, apart from being in bank deposits, post office instruments and PPF, etc, can also be in mutual funds and equity. But if the taxpayer were to earn long-term capital gains (exempt or otherwise) from such mutual fund and/ or equity investments, it would make him ineligible to use Saral II. Similarly, with the second house property - senior citizens or retirees may have over the course of time acquired a second house, the rental income of which is used to augment their pension. But since having a second house makes one ineligible, this group too will not be able to use Saral II.

Moving on, I was happy to observe that the AIR schedule has been retained in Saral II. I remember the time when the new forms were first introduced - taxpayers and the media had raised a hue and cry about the introduction of the AIR schedule. The schedule that essentially requires a declaration of transactions such as deposits over Rs 10 lakh, mutual fund investments or credit card payments of over Rs 2 lakh, property transactions over Rs 30 lakh, purchase of RBI bonds over Rs 5 lakh, etc, was deemed to be an invasion on the privacy of the taxpayer and the government was universally criticised.

But for a moment, consider the following. We are a country of over a billion people. Less than 3% of us actually pay our tax. Did you also know that of those 3%, around 2% are the salaried class who don't have an option in the matter as their tax gets deducted at source? Which means that only a miniscule 1% actually coughs up the tax voluntarily. In other words, out of over a billion people, barely 30 million pay tax. And only 10 million pay tax on their own accord.

Clearly the issue is one of tax compliance. The government too knows this and is busy taking measures to step up compliance. But this too we don't like as we look upon it as an invasion on our privacy. Let me explain.

Basically, there are three ways of ensuring better compliance. One is by reducing rates and ensuring a moderate tax regime such that people don't mind paying their taxes. Even the worst critics of the government would agree that the current tax regime is fairly moderate. The second measure is to detract tax evaders by increasing the probability of detection. And the third, of course, is having adequate penalties in place for those who are apprehended.

Now the big question is how do the authorities increase the probability of detection? The answer is intuitive - identify large spends and check whether the spenders have paid their dues. This is precisely what the AIR schedule seeks to achieve. The logic being that a person who earns the money will eventually spend it. Between the act of earning and spending, it's the job of the authorities to ensure that such person has paid up his tax dues. In other words, the idea is to find out whether he belongs in the 30 million category or the 970 million one.

Therefore, banks, credit card companies, mutual funds, depository participants, RBI, etc, are asked to provide annual information to the government on transactions over specific amounts. The taxpayer in turn is requested to volunteer similar information through the tax return form. Information provided by the organisations is compared and collated with the data provided by the taxpayer and any mismatch is expected to throw up potential tax evader candidates.

Soon, it will be time to file your tax return. If you have nothing to hide, please volunteer more than the required information. Because of our compliance, if even a small percentage of the evaders are caught, leave aside the government - we would have done ourselves a huge favour.

Source :http://digital.dnaindia.com/