Taxpayers rights and obligations in India

Taxes are the lifeline for any economy and it plays an important role in maintaining the payment of tax and development of a country. The Income Tax Act in India was originally drafted in 1922 and later it was amended in 1961 with completely new provisions. The Act has been amended several times to meet the changing needs and requirements. The objective of the Act is to administer collection of taxes and the amount collected from tax is used for the social welfare and nation building.

Taxpayers’ Charter: A guide for all taxpayers

In 2014-15, the Tax Administration Reform Committee (TARC) that was headed by Dr. Parathasarathi Shome submitted its recommendations for reform in direct tax administration. The Taxpayers’ Charter is the result of the recommendation of the Committee. On 13^th August 2020, the Charter was launched by the Prime Minister of India Mr. Narendra Modi with a moto of “Transparent Taxation-Honouring the Honest” and launching of Faceless Assessment, Faceless Appeal and Taxpayers’ Charter.

In 2020 budget Finance Minister Ms Nirmala Sitharaman stated in her speech: “An important aspect of both ease of living and ease of doing business is fairness and efficiency of tax administration. We wish to enshrine in the statutes a tax payer charter through this budget. Our government would like to reassure taxpayers that we remain committed to taking measures so that our citizens are free from harassment of any kind”.

Section 119A of the Income Tax Act

A new provision i.e. Section 119A was inserted by Finance Act 2020 in the Income Tax Act, 1961 it states-

“Section 119A: The Board shall adopt and declare a Taxpayers’ Charter and issue such orders, instructions, directions or guidelines to other Income tax authorities as it may deem fit for the administration of such Charter”.

Rights and obligations of the taxpayers

Let’s first discuss the rights of the taxpayers under the Charter; following are the rights of the taxpayers and duties of the income tax department

• Assisting taxpayers in a fair and reasonable manner;
• Treating every taxpayer as honest unless the tax department believes otherwise;
• Providing a fair and impartial procedure as well as review mechanism;
• Providing accurate and complete information with regard to tax compliance;
• Deciding tax proceedings in a timely manner;
• Ensuring collection of correct amount of tax dues;
• The department said hold its authorities accountable for their actions;
• Respecting privacy of taxpayers and conducting enquiry or examination after following due process of law;
• Maintaining confidential information of taxpayers and not disclosing the information unless required by law;
• Ensuring accountability for the actions of tax officers;
• Taxpayers have freedom to choose their own representative as per the tax law;
• The department shall provide mechanism for lodging a complaint and prompt disposal thereof;
• Resolution of dispute in a fair and impartial manner;
• Considering the cost of compliance, administration and collection of taxes.

Obligations of the taxpayers

• It is expected from the taxpayer to be honest and honestly disclose full information along with timely compliance of the obligations.
• The taxpayers should comply with the tax related obligations and they may seek help of department if required.
• Keep accurate records as required as per law.
• Taxpayers need to be aware and they should know what representatives are doing on their behalf.
• Taxpayers are expected to make timely submissions as per tax law.
• Taxpayers are expected to pay amount due in a timely manner as per law.

Final words

Although, the introduction of Taxpayers’ Charter is praiseworthy, but there remains lot to be done. It should be enforced legally so that taxpayers have an option to voice their concerns if there is any violation of their rights. It has been more than year; the Charter was launched however there are no directions issued by the tax department. The provisions of the Charter should be complied with to ensure smooth relationship between the tax department and taxpayer.