Faceless assessment and appeal, taxpayer charter: Decoding Narendra Modi's new reforms

Prime Minister Narendra Modi on Thursday unveiled a slew of tax reforms, including faceless assessments and appeals and announced the adoption of a taxpayers’ charter by the Income Tax Department as he urged the public to pay their taxes honestly and contribute to nation-building.

The prime minister, launching the Transparent Taxation - Honouring The Honest Platform through video-conferencing, said these reforms would reduce the scope for corruption and overreach by officials and the charter would ensure a free, fair and transparent tax environment.

The prime minister further said that the faceless assessments and taxpayers’ charter would come in force immediately, while faceless appeals would begin on 25 September.

Faceless assessment 

The aim of this scheme is to eliminate the face-to-face interactions between taxpayers and Income Tax Department officers.

Under faceless assessment, a central computer picks up tax returns for scrutiny based on risk parameters and mismatch and then allots them randomly to a team of officers.

This allocation is reviewed by officers at another randomly selected location and only if concurred, a notice is sent by the centralised computer system. All such notices need to be responded to electronically.

Income tax surveys to collect information for scrutiny assessment will be undertaken only by the investigation wing.

The previous regime allowed taxmen from inspector onwards to initiate the survey with approval from the joint commissioner of income tax.

Exceptions will be made in cases of serious fraud, major tax evasion, sensitive and search matters, international tax charges, Black Money Act and Benami property.

Faceless appeal

The Central Board of Direct Taxes (CBDT), which administers personal income tax and corporate tax, will launch faceless appeals beginning 25 September (incidentally the birth anniversary of Deen Dayal Upadhyay) as part of the process to reduce physical interface between tax officers and taxpayers.

Among its key features: Appeals will be allotted at random to officers, taxpayers will not need to visit offices or meet any officials, the identities of the officers deciding the appeal will remain unknown, the appellate decision will be team-based and reviewed.

Modi said the faceless appeal system, which comes into force on 25 September would give the taxpayers the feeling of ‘fairness and fearlessness’. “Effort is to make tax system seamless, painless and faceless… honest taxpayer plays an important role in the development of the nation,” he said.

Asking people to pay due taxes, Modi said while it is the responsibility of tax officers to deal with taxpayers with dignity, people should also consider paying taxes their responsibility.

He added that fundamental reforms are needed and that India is among the nations with the lowest corporate tax rates.

Taxpayer charter

The charter, listing the Income Tax Departments’ duties to taxpayers and in turn highlighting the taxpayers’ responsibilities, commits to  providing fair and reasonable treatment , treating the taxpayer as honest, setting up a mechanism for appeal and review, reducing cost compliance and making timely decisions.

Finance Minister Nirmala Sitharaman, who during the 2020 Union Budget had stated that this charter was being developed, said the scheme would help ease the compliance burden of taxpayers and increase fairness and objectivity in the tax system.

With inputs from PTI