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New I-T norms case of retrospective taxation: Tax firm

The new income tax norms announced by the government will need individuals to submit details of their foreign assets, income from sources outside the country and any foreign trips undertaken, including the expenses borne as well .

These new norms, TP Ostwal, TP Ostwal and Associates, says are a case of retrospective taxation.

“The government ought to have announced this in the month of March or last years March or April. It is a complete going back on the words by the government that they will not change anything retrospectively. It is a clear case of retrospective amendment,” he says .

Below is the verbatim transcript of the interview.

Q: Do you see the new tax return forms as an effective mechanism to curb black money or is it just going to make life more complicated for the individual tax payer?

A: We must understand that the tax returns filed by the tax payer in India never remains secret. It is sold for price by the tax officers. As a result, this information, if it is leaked to terrorists what will happen to those people whose balances are very huge in the bank accounts. They will be soft target of all these blackmailing.

Today’s newspaper shows Avantha Group was blackmailed by its own executives. So, one can expect similar type of threats. Government must ensure the citizen of this country that they will make this information absolutely secret, confidential. Newspapers get an advance tax information of the companies ahead of even the tax department getting that information.

The aggression of the journalist in this country is so good and so huge that information is very transparent today. However, there is a price for that and that price is the risk of the life of the human being. That is one area which I would feel very uncomfortable. You ask for the information of bank accounts but don’t ask the information in the return which is in public domain or the maximum balances then people will be afraid of even keeping the bank balance, the sufferers will be the banks.

Secondly the other issue that has come up is the foreign travel details. Minister and the Prime Minister is on record saying that we will make the life of the tax payer simple with more predictable tax regime and not retrospective amendments. This amendment was brought on the statute on April 15, 2015 with effect from current assessment year which means account year 2014-15. So, is it not retrospective?

The government ought to have announced this in the month of March or last years March or April so that I would maintain all the details. I can understand if I have taken one foreign travel I can give all the details but my company spends money. Now the information which I will have to maintain is who has spent the money, how much I have spent the money, which hotel I have stayed. I may not have the necessary evidences if I have traveled say 50 times in a year. The way in which passports are stamped it is impossible to find out where the original stamp was and when I returned back when was the stamp made. I will have to compile all the details and therefore it is a onerous task. It is not a task of busy executives traveling worldover.

Software industry today there are people who are going abroad for doing the work of the companies, they will have to compile all this information. My opinion is it is a complete going back on the words by the government that retrospectively we will not change anything. It is a clear case of retrospective amendment.

We were blaming the previous regime for retrospective amendments this government is no different.

Furthermore, this information, it is a paradise for an accountant because we take more time to file the returns for the average tax payer and therefore we will charge more fees to the tax payer. So far the government has been talking of the Saral form – Form No.1, ITR 1 which was only salaried class income having no other income can file Saral, now they have said if you travel foreign country Saral will not apply. It means you will have to go for another form which is more onerous and difficult for the people to file. Therefore the tax payers in this country are taken for a ride and because there is no tax payers association in this country this sort of things are happening and people are docile and tolerating.

Any amendment in the income tax form must first of all be brought under the statute and then the rules and then the form. Rules only say prescribed form will be required to be filed but the rule was there on April 1 and at that time this form was not there, the form you introduced on April 15. Genuinely it is going to cause great difficulties for tax payers. I am just not criticising, I really welcome this move but it should have been prospective. It is no doubt a good step that black money is being traced and you are tracking the black money. 99 percent the bureaucracy will be impacted, businessmen does all these payments from his back account and the bureaucrats who have got money aboard, their family members travel along with them how are you going to bring about those – why don’t you make this compulsory, anybody who has taken a foreign trip whether he has income or not should file the return of income. Therefore there must be a design, you work based on design and not on basis of ad-hocism. This was a point which I had raised on your Hindi channel that the travel should be first of all tracked. Indian travel also should be tracked. A bureaucrat who spends huge black money on domestic travel, every weekend they go out.

Q: What about this linking of the Aadhaar to the electronic verification. Do you that at least as being helpful to the individual tax payers and what about people who don’t have Aadhaar cards, will they be given a pass by at least for the first year?

A: I don’t know, somebody has to challenge again before the Supreme Court. Supreme Court says Aadhaar has no sanctity and now the government says Aadhaar should be linked with the return. For example in my own family three members of the family don’t have Aadhaar cards because they are students, they have no time to go to Aadhaar and getting Aadhaar is a difficult job. Where to get the Aadhaar today I myself do not know. I have an Aadhaar card but my daughter does not have what do you do now? So, your return will be now traced separately because you don’t have Aadhaar card? It is good thing to link, in the country you should have one Aadhaar number, pan number etc should be discontinued. The moment the child is born Aadhaar card should be given to him. At certain age the Aadhaar card should be replaced because his photographs will undergo a change and then his phone number should be linked with the Aadhaar card, you can’t get the phone number without Aadhaar card unless you are a foreigner. So, in such situation you can do that. Every country has a Citizens Identification Number, ours is the only country which doesn’t have Citizens Identification Number. If some government tries to do that people file a PIL and all sort of thing to derail the governments project. I believe that Aadhaar card linking with the tax return is a very good thing, nothing wrong about it.

Q: Will this require the government to extend the returns filing date?

A: I entirely support your view. You give them at least two months time to compile the details, it is like a voluminous information based on passport and some people may not have passport. This should not be taken very seriously this year. You have begun this rule which is a very good thing and therefore people will now develop the habit of maintaining the records this year and next year make it compulsory. So, make this voluntary this year. Otherwise those who give this information should get 5 percent tax rebate. You are asking people to do your work. This is the governments work because in the annual information return government is already picking up the information about foreign travel. So, why can’t they link it and cross examine? They are not doing that because they know it very well, their officers have no intention to link it and do it. Therefore they want citizens to be burdened with additional work for no rhyme or reason. Whenever the government wants such an information to be given incentivise the tax payer by some rebate.

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