Saturday, July 28, 2007

Income Tax Online

Can an Indian individual income tax payer manage his income tax payments and returns filing completely online? That's what I examine here in this post.

Returns forms online

Income tax forms have been available at the income tax web site for many years now. The Income Tax Department of India's web site is http://www.incometaxindia.gov.in/ . There are many other regional web sites such as http://incometaxdelhi.nic.in/ for New Delhi, http://www.incometaxmumbai.nic.in/ for Mumbai, http://www.incometaxbangalore.org/ for Bangalore. Unfortunately, as with many other government department web sites, there is no consistency in the way web sites are hosted: domain names differ; the way content is named and organized differs; and content itself (e.g., returns forms and versions) differs.

The site http://incometaxindiaefiling.gov.in/ is meant for e-filing of returns. The returns forms are available from http://incometaxindiaefiling.gov.in/portal/html/downloads.jsp .

TDS forms online

TDS forms such as Form 16 from an employer to an employee and Form 16A from a bank to an account holder still are given only in paper form. The IT department has not specified an XML schema in which these could be represented, a mechanism in which these could be digitally signed by the employer/bank, and electronically transferred to an employee/account holder. Once this happens an individual can use a software of his choice to consolidate the electronic TDS forms to prepare his return form.

Paying income tax online

Income tax can be paid online using the National Securities Depository Limited site https://tin.tin.nsdl.com/etax/Index.html . This site lists the following supported banks:
I believe there would be other banks as well which support online income tax payment. You need to have an online account with the bank to pay taxes using money in your bank account.

Filing returns online

The PDF forms available from the Income Tax Department web site are editable and savable. You can generate XML files adhering to the schema from the department which can be submitted online. Complete instructions are available at http://incometaxindiaefiling.gov.in/portal/index.jsp . A FAQ is available from https://incometaxindiaefiling.gov.in/portal/html/faq.jsp .

The URL to submit the return file in XML format is https://incometaxindiaefiling.gov.in/portal/login.jsp . This is a secure web site which presents its certificate from "(n)Code Solutions - A Divsion of GNFC LTD". The root certification authority is CCA India. One can install the root certificate from the URL http://www.cca.gov.in/download2007.jsp . Many browsers may not include this root certificate by default and you may need to install this manually.

The XML schema for all forms is available from http://incometaxindiaefiling.gov.in/portal/downloads/schemas1234_Ver1.1.zip . There is another link as well: http://incometaxindiaefiling.gov.in/download/schema/ . I am not sure which is the latest, greatest, and correct one.

You need to have an account with the IT web site to submit your returns. The only information you need to provide to create an account is to provide your PAN number, your name, and your date of birth. The user ID for account is the PAN number. You can choose a password of your choice.

Upon submitting the returns XML file, you have an option of digitally signing it. If you don't sign digitally, you need to submit the ITR-V acknowledgment form duly signed at an income tax office.

If you don't have a digital signature, you can get one from the following approved authorities:
Of course, the process of obtaining a digital signature would take a few days which includes submission of various documents for identity and address proofs and verification. The income tax department accepts only Class 2 and Class 3 certificates. Such a certificate for an individual for an year would costs Rs.2245 with TCS (see, http://www.tcs-ca.tcs.co.in/enrollpopups/fee.htm). Other vendors may have different prices.

Software

For assessment years 2006-7, 2005-06, and 2004-05 (as far as I can remember), the income tax department had published a software called Sampark from Taxmann which could be used to compute the income taxes. This software would generate the filled returns forms and challans. For AY 2007-08 I couldn't find this software. What the income tax department calls "return preparation software" does not compute income tax: it's just the editable PDF form from which you can generate the XML file for submission.

So what are the alternatives? One could approach a chartered accountant or compute the taxes oneself using a spread sheet or some software application. One such application is Taxbase (http://sinewave.co.in/Products/Taxbase/Download.asp). I cannot comment on this as I have not tried this software.

This year, I see that there are some web sites which does this job. A few examples include the following:
I have not tried any of these. I have merely listed them here since it's difficult to find these sites together with a simple Google search. These sites charge a few hundred rupees depending on the nature of the return (e.g., income under how many heads).

It is amazing how far India has reached in its e-governance initiatives at least in the income tax department. What further can be done? I have a few suggestions:
  • Provide income tax computation software such as Sampark
  • Develop and publish schema for other forms such as Form 16 and 16A
  • Encourage issue of digital signatures through employers to bring down costs
  • Develop a portal with the following features:
    • registration of tax payers (IT department can mail out passwords)
    • ability to see TDS from employer and banks periodically
    • reminder service for advance payment of taxes
    • ability to compute, pay, and file returns online

4 comments:

  1. Close on the heels of the Income Tax Department allowing Digital signing of Form 16, Skorydov Systems Pvt. Ltd. a software solutions provider has launched www.myitreturn.com for e-filing of tax returns. A first of its kind initiative in India, the website is designed to provide easy and quick web based solutions for filing Income-tax returns and facilitates generation and digital signing of Form 16. Operational since 1st April 2008, www.myitreturn.com is poised to herald a go green movement by facilitating the e filing of returns and eliminating the cumbersome paperwork involved in the tax filing process. It will be intuitive to use for corporates, individuals and tax return preparers. Today, 4 crore people file returns either in paper or electronic format every year and this number is likely to increase to over 10 crore by 2010. Myitreturn.com aspires to cater to this ever-growing group with simple return filing solutions. Last Year the Income-tax Department received nearly 1.5 million returns in electronic format. This figure just shows the popularity of the e-filing process. **

    Skorydov has now introduced software for Digitally Signing of Form 16. Some companies have a large number of employees and the issuance of certificates of deduction of tax at source with manual signatures was becoming very time consuming. To overcome this problem Income tax department has permitted the use of digital signatures to authenticate TDS certificates instead of signing them manually. **

    A week post the launch, Myitreturn.com already has prestigious corporate clients like, Wipro, Reliance Energy Limited, ICICI Bank Limited, Transworks and others. Currently Skorydov has a mandate to file tax returns for over 5 lakh employees from various corporates and individuals who are using the software solution to help their employees file their IT returns.

    Mr. Saakar Suresh Yadav, Founder & Managing Director, Skorydov Systems Pvt. Ltd., states, “Skorydov has always been at the forefront in offering innovative solutions and products in the tax compliance or processes space. Our core strength lies in introducing technologically superior yet easy to use web based solutions to simplify the tax filing process for both individual and corporate users... The Income-tax Department has set a bench mark for other departments in the Government to follow the e-filing path.”

    Skorydov is the first and the only company in country providing this solution of digitally signing and issuing Form16 to corporate clients. Some of the significant features of the software are:


    Generates Form16 as per the Department format
    Certificate is available in tamper proof – digitally signed PDF Format.
    Allows user to import the data in text format with text delimiter.
    Easy installation of software
    Configured with Microsoft Outlook for emailing of Form16 to employees.
    Multiple signing is possible
    Duplicate form 16 can be issued
    1000 forms can be created and signed digitally in less than 60 minutes
    Privacy of the data is optimum as the software is installed at the employer’s computer.

    Now Myitreturn.com combines this product along-with easy online filing of tax returns. By using this service, IT returns can be filed in a secure and low cost manner for just Rs. 199. Corporate houses do not need to disclose any confidential data of their employees while filing their tax returns and can also keep a track of the status of the returns. Chartered Accountants and Income Tax practitioners can help their individual assessee to file returns via this service. The payment module for e-filing of myitreturns.com allows professionals to have their own pricing structure.

    * The provisions of section 203 of the Income-tax Act, 1961 lays down that every person responsible for deduction of tax at source shall furnish a certificate of deduction of tax at source to the deductee specifying therein the amount of the tax deducted and the rate at which the tax has been deducted and other particulars prescribed under rule 31 of the Income-tax Rules, 1962. The relevant Form for such certificate in respect of tax deducted at source from income chargeable under the head "Salaries" is Form No.16.

    ** For Reference of PR: http://incometaxindiaefiling.gov.in/portal/E-filing_report.html

    ** Reference Circular number 2/2007 of the Income-tax Department

    - End -

    About Skorydov Systems Pvt. Ltd.:

    Skorydov Systems Private Limited was formulated in the early 1998 in order to provide innovative software solutions. Today, by providing various softwares for tax compliance, Skorydov has become a leader of sorts in this area. It is the largest provider of tax compliance solutions is the country catering to the entire Income tax department of India. Large corporates also avail of their softwares in order to facilitate tax filing for their employees.

    Skorydov is a common brand among Chartered Accountants and Companies and some of the commonly used products offered by Skorydov are Lexlegis, Taxhelp, eTDS & eReturn.

    For further information, refer to – www.mytaxassistant.com

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  2. Guys, Check out ReachTax.com it looks cool

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  3. Such an interesting question and above that the author has provided amazing explanation over this question. Thanks!
    Online Income Tax Calculator

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