Advance Tax Compliance- “E-campaign by ministry of finance”

Author- Tanvi Thapliyal 

Summary of the Press Release:

The e-campaign begun by the Income Tax Department regarding Advance Tax for the Financial Year (F.Y.) 2023-24 has been recently announced by the Central Board of Direct Taxes (CBDT) on 10^th march 2024 , which operates under the Ministry of Finance, Government of India. The main objective of this electronic campaign is to promote tax compliance among people and companies whose tax returns do not correspond with their financial activities within the designated timeframe.

Understanding Advanced Taxation:

The Advance Tax is a tax payment method that necessitates taxpayers to make periodic payments, typically prior to the conclusion of the fiscal year, as opposed to making a single payment at the end of the year. The aforementioned system plays a vital role within the Indian taxation framework, as it facilitates the government's prompt tax collection and guarantees a consistent income stream over the course of the fiscal year.

According to the Advance Tax system, taxpayers are required to make an estimation of their annual income and subsequently make tax payments in periodic installments. The utilisation of this estimation allows for the government to periodically acquire tax revenues, hence supporting the efficient planning and management of the budget. Furthermore, Advance Tax serves as a valuable tool for taxpayers in effectively managing their cash flows by distributing their tax obligations throughout the year.

Background of the E-Campaign

The initiation of the e-campaign by the Income Tax Department is driven by the need to examine particular financial transactions of individuals and companies in order to guarantee compliance to tax regulations. In today's world, tax authorities possess extensive financial data from diverse sources due to advancements in technology and data analytics. The dataset comprises a range of transactions, including significant investments, property transactions, business dealings, and other significant financial operations.

The examination of these particular financial transactions enables the Income Tax Department to evaluate the accuracy of taxpayers' income reporting and their compliance with tax obligations. Differences between the income reported and the financial transactions can give rise to concerns, suggesting the possibility of tax evasion or non-adherence to regulations. Consequently, the Income Tax Department implements measures such as electronic campaigns to aggressively detect such instances and encourage individuals to address any inconsistencies in their tax payments.

Why Timely Payment of Tax Is Important

Ensuring compliance with tax laws and regulations. ignoring to comply with this requirement may result in the imposition of penalties, fines, or legal actions by tax authorities.
Precise assessment and timely payment of tax obligations empower individuals and corporations to strategically manage their financial resources.
Making tax payments promptly and accurately decreases the probability of being chosen for tax audits or scrutiny by tax authorities.
Tax revenues are of utmost importance in financing government programmes and initiatives that seek to foster economic growth, facilitate infrastructure development, enhance social welfare, and provide public services, thereby making a significant contribution to national development. Punctual tax payments are vital in promoting the development and growth of the nation.

The Primary Goals of the E-Campaign:

According to the press release, the primary goals of the e-campaign launched by the Income Tax Department are as follows:

1. The main objective of the e-campaign is to provide taxpayers with information regarding certain financial transactions that have been discovered by the Income Tax Department. It is probable that these transactions will have tax consequences and could potentially signify inconsistencies in tax obligations.
2. Their aim is of encouraging taxpayers to reassess their tax calculations and verify the alignment between their tax payments and their financial undertakings.
3. The e-campaign aims to encourage voluntary tax compliance by actively communicating and engaging with taxpayers. The primary objective of the Income Tax Department is to promote responsible tax compliance among taxpayers by enhancing their understanding of the significance of precise tax reporting and punctual tax payment.
4. To enhance the convenience of taxpayers in complying to tax regulations i.e. exposure to relevant information and simplify compliance with tax legislation by distributing information regarding significant financial transactions via electronic channels, including email and SMS.
5. In its whole, the e-campaign functions as a proactive initiative undertaken by the Income Tax Department to actively involve taxpayers, enhance their understanding of tax compliance, and guarantee that taxpayers effectively evaluate and meet their predetermined tax obligations in accordance with their financial transactions. The e-campaign seeks to promote a culture of voluntary tax compliance and enhance transparency and compliance in the country by highlighting the significance of precise tax reporting and prompt tax payments.

Details Of This Initiative

The e-campaign launched by the Income Tax Department operates through electronic communication channels, primarily utilizing email and SMS, to reach out to taxpayers. Here's a detailed explanation of how the e-campaign works:

Communication Methods

• Taxpayers identified by the Income Tax Department as having significant financial transactions inconsistent with their tax payments receive notifications via email and SMS.
• These notifications are marked as "Advance Tax e-Campaign-Significant Transactions for A.Y. 2024-25."
• The purpose of these notifications is to inform taxpayers about the specific financial transactions flagged by the department and encourage them to review their tax liabilities.

Deadline for Paying Advance Tax

• Taxpayers are urged to compute their advance tax liability correctly and deposit the due advance tax on or before March 15, 2024.
• This deadline provides taxpayers with a clear timeframe within which they need to take action to ensure compliance with their tax obligations.

Sources of Information

• The Income Tax Department gathers information on specific financial transactions of taxpayers from various sources, including financial institutions, regulatory authorities, and other government agencies.
• These sources provide data on transactions such as high-value investments, property deals, and business transactions, among others.
• The department then analyses this data to identify cases where tax payments do not align with the financial transactions reported by taxpayers.

Significance of Annual Information Statement (AIS)

• The Annual Information Statement (AIS) plays a crucial role in promoting transparency and compliance in the tax system.
• It contains details of specified financial transactions of taxpayers, compiled from various sources, and reflects the value of 'Significant Transactions.'
• Taxpayers can access the AIS through their e-filing accounts and view details of significant transactions, which are used by the department to carry out analyses and identify cases for the e-campaign.
• By providing taxpayers with access to information about their financial transactions, the AIS promotes transparency and empowers taxpayers to review and verify their tax liabilities accurately.

Procedure To Comply By Advance Taxation

For taxpayers to access details of significant transactions through their e-filing accounts and the Compliance Portal, the following steps need to be followed:

For Taxpayers with E-Filing Accounts

1. Login to E-Filing Account: Taxpayers who have already registered for an e-filing account need to log in to their accounts using their user ID (PAN) and password on the Income Tax Department's e-filing website.
2. Navigate to Compliance Portal: Once logged in, taxpayers should navigate to the Compliance Portal section. This section can usually be found under the 'My Account' or 'Dashboard' tab.
3. Access E-Campaign Tab: Within the Compliance Portal, taxpayers should look for the specific tab related to the e-campaign, which may be labeled as 'E-Campaign' or 'Advance Tax e-Campaign-Significant Transactions for A.Y. 2024-25.' Click on this tab to access the details of significant transactions.
4. View Significant Transactions: Upon accessing the e-campaign tab, taxpayers will be able to view details of the significant transactions identified by the Income Tax Department. This information will provide insights into the specific financial activities flagged by the department.
5. Review and Verify: Taxpayers should carefully review the details of significant transactions provided and cross-reference them with their own financial records. This step ensures accuracy and allows taxpayers to assess their tax liabilities correctly.

For Individuals or Entities Not Registered on E-Filing Website

1. Register on E-Filing Website: Individuals or entities who are not yet registered for an e-filing account need to visit the Income Tax Department's e-filing website.
2. Click on Register Button: On the e-filing website's homepage, locate and click on the 'Register' button, which is typically prominently displayed for new users.
3. Provide Relevant Details: Follow the instructions provided on the registration page and fill in the required details accurately. This typically includes personal information such as PAN, name, date of birth, contact details, and email address.
4. Complete Registration: After providing all necessary details, submit the registration form. The website may send a verification link or code to the registered email address or mobile number for verification purposes.
5. Login to E-Filing Account: Once the registration process is complete and the account is verified, individuals or entities can log in to their newly created e-filing accounts using the provided user ID (PAN) and password.
6. Navigate to Compliance Portal and Access E-Campaign Tab: Follow the same steps outlined above for taxpayers with e-filing accounts, i.e., navigate to the Compliance Portal section and access the specific tab related to the e-campaign.
7. View Significant Transactions and Take Necessary Action: Upon accessing the e-campaign tab, individuals or entities can view details of significant transactions and take necessary actions, such as reviewing their tax liabilities and ensuring timely payment of advance tax.

Conclusion

The implementation of the e-campaign by the Income Tax Department signifies an important step in improving the quality of taxpayer services and the promotion of voluntary tax compliance. The campaign uses proactive communication channels, including email and SMS, to communicate information to taxpayers regarding significant financial transactions and encourages them to diligently assess their tax obligations with precision. The government's dedication to offering easily accessible and prompt interventions in tax affairs is demonstrated by this programme, which aims to promote transparency and accountability in the tax system. The punctual and precise remittance of tax payments holds significant importance, not alone for individual taxpayers, but also for the nation's efforts in revenue generation and economic advancement. Taxpayers make a responsible contribution to the government's revenue pool by meeting their tax obligations. This revenue is crucial for financing public services, infrastructure development, and social welfare programmes. Hence, the electronic campaign assumes a crucial function in developing a culture of adherence and boosting the nation's economic advancement and well-being.

FAQ'S

What is advance tax?

Advance tax refers to the payment of income tax in installments throughout the year, rather than a lump sum payment at the year's end. It's based on the principle of "pay as you earn" and is applicable when the tax liability of an individual or company exceeds ₹10,000 in a financial year.

How to pay advance tax?

Advance tax can be paid online through the Income Tax Department's official website or by using the net banking facility of authorized banks. The process involves filling out the relevant challan (ITNS 280) and selecting the correct assessment year, along with other required details.

How to calculate advance tax?

Advance tax is calculated by estimating the total income for the year, applying the current income tax rates to calculate the tax liability, and then subtracting any tax deducted at source (TDS). The resulting tax liability is then paid in installments as per the due dates provided by the Income Tax Department.

Who is liable to pay advance tax?

Individuals, businesses, and corporations with a tax liability exceeding ₹10,000 in a financial year are required to pay advance tax. This includes salaried individuals, freelancers, businesses, and professionals. However, senior citizens (above 60 years) who do not run a business are exempt from advance tax.

What is advance payment of tax?

Advance payment of tax, or advance tax, involves paying income tax in parts throughout the year, based on estimated earnings, rather than paying the entire amount at the end of the fiscal year. It's designed to help taxpayers manage their tax liability by spreading payments.

How to pay advance income tax online?

Paying advance income tax online involves visiting the Income Tax Department's e-payment portal or using the net banking facility provided by authorized banks. Taxpayers need to fill in the requisite details on Challan 280 and select the correct assessment year for which the advance tax payment is made.

How to calculate advance tax for AY 2023-24?

To calculate advance tax for AY 2023-24, estimate the total income for the financial year 2022-23, calculate the tax liability using the applicable income tax slabs, and deduct any TDS or tax credits available. The resulting net tax liability is payable as advance tax in installments as per ITD guidelines.

What is advance tax in India?

In India, advance tax is a mechanism where taxpayers make payments towards their estimated tax liability in installments throughout the financial year, rather than paying a lump sum amount at the end of the year. It applies to all taxpayers whose tax liability exceeds ₹10,000 in a financial year.

Who should pay advance tax?

Advance tax should be paid by all taxpayers, including salaried individuals, self-employed professionals, businessmen, and companies, whose tax liability for a financial year exceeds ₹10,000. Exceptions include senior citizens who do not have income from business or profession.