Written in : June 1998

As we all know, one major objective of the tax department is to widen the tax base. Besides, the government desires that the tax department improve its image as a friendly, easy-to-deal-with department of the government. Budget 98 makes an effort on both these fronts

We have a 4EC scheme on under which if you fulfill any two out of four economic criteria, you are required to file a tax return even if you do not have taxable income. The assumption was that if you have fulfilled two such criteria, the chances of your having taxable income were high and you should be filing your tax returns. Last year was the first year of the Scheme.

This Scheme is now further strengthened and is renamed as One by Six Scheme. The four criteria have been increased to six. The six criteria now are: Old ones:

• subscription to a telephone
• ownership or occupation of residential or commercial property of a given area
• ownership or lease of a motor vehicle
• expenditure on foreign travel of self or others

• holding a credit card (not an add-on card)
• membership of a club with admission fee of more than Rs.25,000

What is more, it will be enough if just one of the six criteria were fulfilled for return filing to become essential. It is this, more than the addition of two more criteria, which will widen the base of people covered by the Scheme. It is a different matter whether this will also result in widening of the tax base.

The requirement of foreign travel is now diluted to exclude travel to neighbouring countries and places of pilgrimage which shall be specified by government. Presumably, travel to Nepal etc and for Haj will now be outside the purview of the Scheme.

The Scheme earlier covered 12 cities. Now it will cover 35 cities.

The Scheme is to be effective from August 1, 1998. And it is to apply in relation to assessment year 1998-99, ie, for the financial year ended on 31.3.1998.

Persons not having business income are required to file returns by June 30. Since the Scheme will become effective August 1, presumably the government will extend the time by which the returns will be filed and give a few more months to those covered by the Scheme to file returns.

There is one criteria which I have not been able to fathom so far - subscription to a telephone. The sheer number of telephones in the country is huge. A very large majority of phones are subscribed to by businesses, government, existing taxpayers etc. The effort of tracing defaulting taxpayers out of this large list will, I believe, not be worth the effort.

As I said, the list of persons covered by the Scheme has now become multi-fold. The effort that the department will have to make to reach out to the persons, send letters, collect replies, match replies with the database and follow up will be huge. Whether the results will match the efforts is anyone's guess. The government hopes to increase the individual tax payer base by a whopping 50% in one year. One wishes the best to the government in this.

A penalty is now specified - of Rs.1,000 - if a return required to be filed is not filed within the due date. Such a penalty was absent.

This is meant for many salaried taxpayers who are required to file returns and do not do so with the comfort that even if they do not file the returns, or file them late, the department can do nothing - there being no tax payable, and so no interest payable. They will now have to pay penalty of Rs.1,000.

As you know, the department is now on a drive to collect applications for Permanent Account Numbers (PAN) from taxpayers and allot them. It is expected that within a 2 or 3 months most PANs will be allotted.

The government now also proposes that PANs or GIR Numbers (where PANs are not allotted) will be essential to be quoted in high value transactions. So, you will be required to quote your PAN when you enter into transactions of high value like:

• purchase and sale of property
• purchase and sale of shares, vehicles etc
• making of deposits with banks
• opening of bank accounts etc
• applying for phone connections

The government will also notify classes of persons to whom this rule will not apply. Those not having PAN or GIR will be required to furnish a form giving specific details.

This requirement will also become effective August 1, 1998.

This is a progressive requirement and quite welcome.

The next taxpayer friendly device is the introduction of Saral, a one-page, easy to fill and file, return form. According to the Finance Minister, Saral will not need the help of accountants and can be filed by anyone directly.

The government desires to make the Saral form available from many outlets including mobile vans and take the help of non-government organisations in ensuring that it is spread out and is made available from all parts of the country.

The FM also made a statement that all non-corporate taxpayers will be entitled to use the Saral form. That is a rather surprising statement and one will really have to see it translated into action.

The form itself is yet to be released to know how saral (easy) it really is. I shall keep you posted on it whenever the form is made available.

Another interesting feature of the new taxpayer friendly approach of the department is the introduction of a scheme by which taxpayers are recognised and rewarded for, well, being taxpayers. This is called Sammaan, meaning recognition. In Sammaan, taxpayers will be entitled to privileges which ordinary citizens - non-taxpayers - will not be entitled to. The privileges are yet to be notified and one waits with interest to see whether any real benefits are made available to taxpayers for contributing to the government's kitty.