Computerization of Form 121 (Earlier 15G/H)

Background

Forms 15G/H, used for declaring non-taxable income to avoid TDS, were mostly paper-based and were inconvenient for everybody, the tax-payer, the person receiving it and the IT Deptt. Now they have been replaced by Form 121, but all their disadvantage still remain. These forms do not provide all the necessary information to the IT Deptt. and it is either impossible or quite difficult to verify whether the tax-payer has provided the correct data in the form.

Some organizations today allow the tax-payers to submit the basic data required for filling these forms online and do not insist that the tax-payers submit a hard copy. This saves some inconvenience for the tax-payers but not for these organizations or the IT Deptt. because further processing of these forms is paper-based only. Actually, these organizations may be creating these forms on the basis of the online data provided by the tax-payer and printing these forms themselves on paper for onward submission to the IT Deptt.

Proposal

In this article I suggest a way for the true computerization of these forms which will solve all the problems described above. The method is completely paperless and most importantly, it is very easy and simple for everybody.

We all have our accounts on the portal of the Income-tax Deptt. where we file our Income-tax returns every year. We log into their site using our User Id (which is nothing but our PAN) and password for filing our return and accessing some other data like our AIS, TIS, Form 26AS etc.

New Link and Financial Year selection

The IT Deptt. should create a new link on their web-site which may be worded something like – “Declaration of Non-taxable income to Avoid TDS”. On clicking this link, the tax-payer will be asked to select the Financial Year for which he wants to furnish this declaration. Normally, this will be current financial year only. There is no relevance of any old financial year. However, during the months of January to March, some tax-payers may like to furnish declaration for the next financial year, i.e., the one which will start from April and, therefore, they may be allowed to choose forthcoming financial year also besides the current year.

Income Declaration

After this, the tax-payer will be asked to type his estimated total income for the chosen financial year which should be below taxable limit. Currently, it will be up to 4 Lakh for people under 60 years and up to 12 Lakh for those above this age. There will be no need for the tax-payer to type his age since this is already available with the IT Deptt. Also, there is no need for him to furnish his Name, Address, Permanent Account Number, Status, Residential status, Email id, Contact number, Date of Birth/ Incorporation since all this data is already known to the Deptt.

Entry of TAN’s

After selecting the financial year and typing the estimated total income for that year, the tax-payer should be asked to type TAN of all the banks and other institutions where he has investments and who would be paying him interests/dividends etc. during the financial year. As per the current practices, he will need to type TAN of all the banks which are expected to pay him interest of more than Rs. 1 Lakh if he is a Sr. Citizen. Otherwise, he should type the TAN of all those banks who will pay him more than Rs. 50,000/-.

This is all. The tax-payers need not do anything more.

Updation of Databases by Banks/Institutions

All the banks/institutions may already be having their accounts on the portal of IT Deptt. If they don’t, their accounts can be created. When they log into their account, they will immediately come to know the PAN of all the tax-payers who have typed their TAN and declared that their estimated income is less than taxable limit and, therefore, tax should not be deducted from their payments. The banks can, thus, update their databases accordingly so that their interest calculation software does not deduct IT at source for these tax-payers. They can do it either manually, or still better, can develop a computer program which will read the database of the IT Deptt. and update their databases automatically. For this, they can coordinate with the IT Deptt. and request a controlled/restricted access of its database. The IT Deptt will have to allow the banks to access only PAN of these tax-payers and no other data stored in its database. This has minimal security risk.

Data Entry by Banks

The banks will, then, fill following two items on the portal of the IT Deptt. for each tax-payer: 1. Income which the bank will pay to the tax-payer 2. Nature of this income

Even this data entry can be automated through a computer program and data can be copied from Banks’s database to IT Deptt.’s database automatically.

There will be no need for the banks to provide following Details of the person responsible for paying income since all this will already be known to the IT Deptt.:

1. Name 2. Address 3. Permanent Account Number 4. Email id 5. Contact number

Also, there will be no need for the tax-payer to provide the details of the 2 previous income-tax returns which have been newly introduced in Form 121. This is internal data of the IT Deptt. and it is already available with them. Further, there will be no need of furnishing any information about Forms 121 filed earlier since all the income data pertaining to the tax-payer provided by the banks will be available at the same place.

Sounds unbelievable? Then let us take an example:

There are 3 tax payers whose PAN’s are PAN1, PAN2, and PAN3. There are 4 banks with TAN’s as TAN1, TAN2, TAN3 and TAN4.

The interest amounts to be paid by these banks to the tax-payers are given below:

• PAN1

1. TAN1 will pay Rs. 55,000/-
2. TAN2 Nil
3. TAN3 will pay Rs. 60,000/-
4. TAN4 will pay Rs. 65,000/-

Total Income of PAN1 = Rs. 1,80,000/-

• PAN2

1. TAN1 will pay Rs. 70,000/-
2. TAN2 will pay Rs. 75,000/-
3. TAN3 Nil
4. TAN4 will pay Rs. 80,000/-

Total Income of PAN2 = Rs. 2,25,000/-

• PAN3

1. TAN1 will pay Rs. 85,000/-
2. TAN2 will pay Rs. 90,000/-
3. TAN3 will pay Rs. 95,000/-
4. TAN4 Nil

Total Income of PAN3 = Rs. 2,70,000/-

On the IT Department’s portal, the tax-payers will type the TAN’s of the banks in which they have deposits as given below:

• PAN1 will type the following TAN’s

1. TAN1
2. TAN3
3. TAN4

• PAN2 will type the following TAN’s

1. TAN1
2. TAN2
3. TAN4

• PAN3 will type the following TAN’s

1. TAN1
2. TAN2
3. TAN3

When the banks log into their accounts, they will find PAN’s of various tax-payers as shown below:

• TAN1 will see the following PAN’s

1. PAN1
2. PAN2
3. PAN3

• TAN2 will see the following PAN’s

1. PAN2
2. PAN3

• TAN3 will see the following PAN’s

1. PAN1
2. PAN3

• TAN4 will see the following PAN’s

1. PAN1
2. PAN2

Now, the banks will type following interest amounts against each tax-payer:

• TAN1 will type the following amounts -

1. PAN1 will be paid Rs. 55,000/-
2. PAN2 will be paid Rs. 70,000/-
3. PAN3 will be paid Rs. 85,000/-

• TAN2 will type the following amounts -

1. PAN2 will be paid Rs. 75,000/-
2. PAN3 will be paid Rs. 90,000/-

• TAN3 will type the following amounts -

1. PAN1 will be paid Rs. 60,000/-
2. PAN3 will be paid Rs. 95,000/-

• TAN4 will type the following amounts -

1. PAN1 will be paid Rs. 65,000/-
2. PAN2 will be paid Rs. 80,000/-

It is advised that the banks should fill the income data, not the tax-payers since tax-payers may not have full expertise in interest calculations and may, therefore, commit mistakes.

Now, the IT Deptt. will have the following data about each tax-payer:

• PAN1 is getting following income from various banks -

1. From TAN1 Rs. 55,000/-
2. From TAN3 Rs. 60,000/-
3. From TAN4 Rs. 65,000/-

Total Income = Rs. 1,80,000/-

• PAN2 is getting following income from various banks -

1. From TAN1 Rs. 70,000/-
2. From TAN2 Rs. 75,000/-
3. From TAN4 Rs. 80,000/-

Total Income = Rs. 2,25,000/-

• PAN3 is getting following income from various banks -

1. From TAN1 Rs. 85,000/-
2. From TAN2 Rs. 90,000/-
3. From TAN3 Rs. 95,000/-

Total Income = Rs. 2,70,000/-

So simple, isn’t it? There is no need of breaking your head on things such as how much income you are declaring now, how much you declared earlier, how much is the total you declared till now etc. etc.