Income Tax Department

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Logo of Income Tax Department India.png
Agency overview
Formed1860; 160 years ago (1860)[1][2]
JurisdictionGovernment of India
HeadquartersNorth Block, Secretariat Building, New Delhi
Employees46,000 (2016–17 est.)[3]
Minister responsible
Agency executive
Websiteincometaxindia.gov.in

The Income Tax Department (also referred to as IT Department or ITD) is a government agency undertaking direct tax collection of the Government of India. It functions under the Department of Revenue of the Ministry of Finance.[5] Income Tax Department is headed by the apex body Central Board of Direct Taxes (CBDT). Main responsibility of IT Department is to enforce various direct tax laws, most important among these being the Income-tax Act, 1961, to collect revenue for Government of India. It also enforces other economic laws like the Benami Transactions (Prohibition) Act, 1988[6] and the Black Money Act, 2015.[7]

The Income Tax Act, 1961 has wide scope and empowers ITD to levy tax on income of individuals, firms, companies, local authorities, societies, or other artificial juridical persons.[8] Therefore, Income Tax Department influences businesses, professionals, NGOs, income earning citizens, and local authorities among others. The Act empowers Income Tax Department to tax international businesses and professionals and therefore ITD deals in all matters of Double Taxation Avoidance Agreements and various other aspects of international taxation such as Transfer pricing. Combating tax evasion and tax avoidance practices is key duty of ITD to ensure constitutionally guided political economy. One measure to combat aggressive tax avoidance is General Anti Avoidance Rules (GAAR).[9]

History[edit]

Ancient Times[edit]

Taxation has been one of the key function of the sovereign state since ancient times. In Manusmriti, the Manu, stated that king has the sovereign power to levy and collect tax according to sastras.[10]

लोके च करादिग्रहणो शास्त्रनिष्ठः स्यात् । — Manu, Sloka 128, Manusmriti [10] (It is in consonance with sastras to collect taxes from citizen.)

In Bodhayana Dharmasutras, it is mentioned that the king got 1/6th part of income from his subjects which was legally termed as tax. In lieu of this tax, the king has a duty to protect his subjects.[10]

According to Kautilya's Arthashastra – an ancient treatise on the study of economics, the art of governance and foreign policy – artha has a much wider significance than wealth. According to him, the power of the government depended upon the strength of its treasury. He states: "From the treasury comes the power of the government, and the earth, whose ornament is the treasury, is acquired by means of the treasury and army." In Raghuvamsh, Kalidas, eulogizing King Dalip, said, "it was only for the good of his subjects that he collected taxes from them just as the sun draws moisture from the earth to give it back a thousand time."[11]

Modern Times[edit]

The 19th century saw the establishment of British Rule in India. Following the Mutiny of 1857, the British Government faced an acute financial crisis. To fill up the treasury, the first Income-tax Act was introduced in February, 1860 by James Wilson, who became British-India's first Finance Minister.[11] The Act received the assent of the Governor General on July 24, 1860, and came into effect immediately. It was divided into 21 parts consisting of no less than 259 sections. Income was classified under four schedules: i) income from landed property; ii) income from professions and trade; iii) income from securities, annuities and dividends; and iv) income from salaries and pensions. Agricultural income was subject to tax.[11]

Subsequently, many laws were brought to streamline income tax laws. For example, Super-Rich Tax was introduced in 1918 and new Income-tax Act was passed in 1918. But most important among all these were the Income-tax Act of 1922. This Act of 1922 marked an important change from the Act of 1918 by shifting the administration of the income tax from the hands of Provincial Government to the Central government. Another remarkable feature of this Act was that the rales were to be enunciated by the annual finance Acts instead of in the basic enactment.[12] Again, new Income-tax Act came in 1939.

Contemporary Times[edit]

The 1922 Act was amended not less than twenty nine times between 1939 and 1956. A tax on capital gains was imposed for the first time in 1946, although the concept of ‘capital gains’ has been amended many times by later amendments.[12] In 1956, Mr. Nicholas Kaldor to investigate the Indian Tax System in the light of the revenue requirement of the second five-year plan (1956–1961). He submitted an exhaustive report for a coordinated tax system and therefore,the result was the enactment of several taxation Acts, viz., the wealth-tax Act 1957, the Expenditure-tax Act, 1957 and the Gift-tax Act, 1958.[12]

The Direct Taxes Administration Enquiry Committee, under the Chairmanship of Shri Mahavir Tyagi, submitted its Report on Nov 30, 1959 and the recommendations made therein took shape of the Income Tax Act, 1961. The 1961 Act came in to force with effect from 1 April 1962 by replacing the Indian Income Tax Act, 1922 which had remained in operation for 40 years. The present law of income tax is governed by the Income Tax Act, 1961, which has 298 sections and 4 schedules and is applicable to whole of India including the state of Jammu and Kashmir.[12]

Administration in ITD[edit]

Administration in Income Tax Department (ITD) is run through statutory body, the Central Board of Direct Taxes (CBDT), at apex level and 18 territory based regional headquarters at field offices level. Besides these are 10 specialized directorates within Income Tax Department (ITD), most extensive and famous among these being Directorate of Investigation.

CBDT[edit]

The Central Board of Direct Taxes (CBDT) is a part of Department of Revenue in the Ministry of Finance. The CBDT provides inputs for policy and planning of direct taxes in India, and is also responsible for administration of direct tax laws through the IT Department. The CBDT is a statutory authority functioning under the Central Board of Revenue Act, 1963. The officials of the Board in their ex officio capacity also function as a division of the Ministry dealing with matters relating to levy and collection of direct taxes. The CBDT is headed by Chairman and also comprises six members, all of whom are ex officio Special Secretary to the Government of India.

The Chairman and members of the CBDT are selected from the Indian Revenue Service (IRS), whose members constitute the top management of the IT Department. The Chairman and every member of CBDT are responsible for exercising supervisory control over specialized functional categories at field offices of IT Department. Various functions and responsibilities of the CBDT are distributed amongst Chairman and six members, with only fundamental issues reserved for collective decision by the CBDT. The areas for collective decision by the CBDT include policy regarding discharge of statutory functions of the CBDT and of the Union Government under the various direct tax laws.[13]

Regional Headquarters[edit]

At present Income Tax Department (ITD) field offices are divided into 18 regions with territorial jurisdiction and 1 region for International Taxation. As required for efficient and effective administration, these regions have some administrative autonomy to carry out duties assigned by CBDT.

List of ITD Regions[14][15]
Serial No. Region (headed by PrCCIT) Sub-Regions (headed by CCsIT) Headquarter City
1 Gujarat CCsIT, Ahmedabad-1, 2, TDS, Surat, Vadodara, Rajkot, DGIT (Inv.), Ahmedabad Ahmedabad
2 Karnataka & Goa CCsIT, Bengaluru-1 & 2, TDS, Panaji, DGIT (Inv.), Bengaluru Bengaluru
3 Madhya Pradesh & Chhattisgarh CCsIT, Raipur, Indore, DGIT (Inv.), Bhopal Bhopal
4 Odisha None Bhubaneswar
5 North West Region CCsIT Amritsar, Ludhiana, Shimla, Panchkula, DGIT (Inv.), Chandigarh Chandigarh
6 Tamil Nadu & Puducherry CCsIT, Chennai-1 to 4, TDS, Coimbatore, Madurai, Trichy, DGIT (Inv.), Chennai Chennai
7 Delhi CCsIT Delhi-1 to 9, TDS, Central, Exemptions, DsGIT (Inv.), Delhi, (Risk Assessment), (I&CI) Delhi
8 North East Region CCIT, Shillong Guwahati
9 Andhra Pradesh & Telangana CCsIT, Hyderabad, Vijayawada, Vishakhapatnam, DGIT (Inv.), Hyderabad Hyderabad
10 Rajasthan CCsIT, Jodhpur, Udaipur DGIT (Inv.), Jaipur Jaipur
11 UP (West) & Uttarakhand CCsIT, Ghaziabad, Dehradun Kanpur
12 Kerala CCsIT, Thiruvananthpuram, DGIT (Inv.), Kochi Kochi
13 West Bengal & Sikkim CCsIT, Kolkata-1 to 6, TDS, DGIT (Inv.), Kolkata Kolkata
14 UP (East) CCsIT, Allahabad, Bareilly, DGIT (Inv.), Lucknow Lucknow
15 Mumbai CCsIT, Mumbai-1 to 11, TDS, Central-1, 2, DGIT (Inv.), Mumbai, Mumbai
16 Nagpur None Nagpur
17 Bihar & Jharkhand CCIT, Ranchi, DGIT (Inv.), Patna Patna
18 Pune CCsIT, Pune, Thane, Nasik, DGIT (Inv.), Pune Pune
19 International Taxation CCsIT (International Taxation), Bengaluru, Mumbai Delhi

Directorates[edit]

Directorates are meant to take responsibility of specialized functions. There are 10 specialized directorates within Income Tax Department (ITD), most extensive and famous among these being Directorate of Investigation.

List of ITD Directorates[16][15]
Serial No. Directorate Head of Directorate Headquarter City
1 Investigation 18 Director Generals of Income Tax (DGsIT) At respective regional headquarters
2 Systems Principal Director General of Income Tax New Delhi
3 Legal & Research Principal Director General of Income Tax New Delhi
4 Training Principal Director General of Income Tax NADT, Nagpur
5 Intelligence & Criminal Investigation (I&CI) Director General of Income Tax New Delhi
6 Vigilance Principal Director General of Income Tax/CVO New Delhi
7 Administration & Tax Payer Services (TPS) Principal Director General of Income Tax New Delhi
8 Logistics Principal Director General of Income Tax New Delhi
9 Human Resource Development (HRD) Principal Director General of Income Tax New Delhi
10 Risk Assessment Director General of Income Tax New Delhi

Good Governance by ITD[edit]

Income Tax Department of Government of India is a leader in good governance. Since large portion of population interacts with department on yearly basis hence good governance by ITD has improved citizen satisfaction with government functioning.[17] A very well known model of good governance, Sevottam, is being implemented by Income Tax Department.

Sevottam[edit]

Income Tax Department (ITD) is leader in implementing Sevottam,[18] which is certification of excellent quality of public service delivery in India. The term Sevottam comes from the Hindi words "Seva" and "Uttam" and means excellence in service delivery. It involves the identification of the services delivered to the citizens, quality of service, its objective, improvement of quality, by using innovative methods for developing business process and more informative with the help of information technology. The citizen-centric approach includes the following three components:[19]

  • Citizen Charter and Service Standards: Citizen's Charter[20] is being published by ITD from time to time to lay down standards of service delivery to taxpayers.
  • Public Grievances: Income Tax Department has used technology for easy registration and faster disposal of grievances. Various initiatives taken by ITD are: eNivaran[21] lets taxpayers to directly lodge grievance with their concerned ITD officer; Aaykar Seva Kendra (ASK) acts at integrated grievance redressal center; eSahyog[22] allows replies through email to ITD officers on detection of errors in tax filings by taxpayers; and other portals like CPGRAMS.
  • Service Delivery Enablers: This includes customer feedback, employee motivation and infrastructure. Income Tax Department (ITD) functions largely through computer systems and networks; and feedback of taxpayers is taken regularly through Pre-Budget Consultation[23] and regular industry-ministry/department interactions, Outreach Programmes[24] etc. Employee motivation is subjective but good public perception of ITD ensure high employee motivation.

Ayakar Seva Kendra (ASK)[edit]

Ayakar Seva Kendra (ASK) is an integrated model that provides single window system for registration of all applications including those for redressal of grievances as well as receipt of paper return.[25] The assesses can approach ASK and pose all kinds of queries. ASK is available at almost all Income Tax Department offices across the country.

Tax Return Preparer Scheme (TRPS)[edit]

Launched in 2006 by the Income Tax Department, Tax Return Preparer Scheme(TRPS) assists small and marginal taxpayers in preparing and filing their tax returns by creating a company of ‘Tax Return Preparers’ (TRPs). Tax Return Preparers (TRPs) are experts in income tax law and in filing of Income Tax Return (ITR). They can charge a maximum fee of Rs. 250, or sometimes nothing.[17]

Simplified Income Tax Return (ITR) Filing[edit]

Over the years Income Tax Return (ITR) filing has been made more simple, convenient, and smart through use of technology. This includes following:[17]

  • eFiling: eFiling of returns ensured that all returns can be submitted in submitted in digital form at dedicated efiling website (https://incometaxindiaefiling.gov.in) without any need of submitting paper returns to Income Tax Department offices. This not only reduced grievances of taxpayers on account of errors in data entry but also made filing of return of income any-time, any-where, convenient exercise.
  • SAHAJ and SUGAM:[26] ITR-1 (SAHAJ) is simplified version of earlier lengthy and complex ITR-1, which is applicable to salaried employees, similarly ITR-4 (SUGAM) is simplified version of ITR-4, which is applicable to small businesses and professionals.
  • eVerification: Use of Aadhar Card or Bank Account is made to ensure verification of ITR by taxpayers. It is user-friendly and removed of the hassle of sending the hard copy of the ITR-V form to CPC Centre at Bengaluru, Karnataka. Taxpayers have also reported that the process of e-verification shortens the time taken for processing of the return and issue of refund.[17]
  • Pre-filled ITR: As part of efforts to popularize the electronic mode of filing Income Tax Returns (ITRs), the CBDT is planning to provide “pre-filled” return forms to filers which will have an automatic upload of data on income and other vitals of a taxpayer.[17]

Law Enforcement Powers of ITD[edit]

Taxation law is not only very complex as it requires specialized knowledge and expertise to implement, but also it necessitates various kinds of deterrent actions to ensure compliance by taxpayers.

  • Assessment: Assessment is done to ensure correct estimation of total taxable income of an assessee (i.e. taxpayer) and it determines amount of tax to be payable by (or to be refunded to) asseesee.
  • Fines and Penalty: These are financial punishments for non-compliance with any specific provision of the Income-tax Act.
  • Surveys: ITD can survey any business premises for physical verification of records and other valuables.
  • Search and Seizure: ITD can search residential and business premises of any taxpayer to check records and valuables to ensure that no evasion of tax is taking place.
  • Prosecution: Certain actions of taxpayers, for example willful evasion of tax, are considered as criminal offence by the Income-tax Act and hence these offences result in prosecution.

Recent Law Enforcement Actions by ITD[edit]

Demonetization Period[edit]

The Finance Ministry instructed all revenue intelligence agencies to join the crackdown on forex traders, hawala operators and jewellers besides tracking movement of demonetised currency notes.[27]

Income Tax departments raided various illegal tax-evasive businesses in Delhi, Mumbai, Chandigarh, Ludhiana and other cities that traded with demonetised currency.[28] The Enforcement Directorate issued several FEMA notices to forex and gold traders.[27] Large sum of cash in defunct notes were seized in different parts of the country.[29][30][31][32][33] In Chhattisgarh liquid cash worth of 4.4 million (US$62,000) was seized.[34] In December 2016, the Income Tax department received more than 4000 emails, on black money holders, in India, within 3 days, when Income Tax Department, issued in public notice an email to report black money[35]

Huge amounts of cash in the form of new notes were seized all over the country after the demonetisation.[36][37]

In December 2016, over ₹4 crore in new ₹2000 notes were seized from four persons in Bangalore,[38][39][40] ₹33 lakh in ₹2000 notes were recovered from Manish Sharma, an expelled BJP leader in West Bengal,[41][42] and ₹1.5 crore was seized in Goa.[43] 900 notes of the new ₹2000 denomination were seized from a BJP leader in Tamil Nadu.[44] Around ₹10 crore in new ₹2000 notes were seized in Chennai.[45]

As of 10 December, ₹242 crore in new notes had been seized.[46]

See also[edit]

References[edit]

  1. ^ "The evolution of income-tax".
  2. ^ "July 24 to be celebrated as Income Tax Day".
  3. ^ "Central govt to hire 2.8 lakh more staff, police, I-T & customs to get lion's share – Times of India".
  4. ^ "IRS officer PC Mody takes charge as new CBDT chairman".
  5. ^ "Department of Revenue- Functions". Archived from the original on 1 January 2019. Retrieved 1 January 2019.
  6. ^ "THE BENAMI TRANSACTIONS (PROHIBITION) AMENDMENT ACT, 2016" (PDF). The Gazette of India. 11 August 2016. Retrieved 10 January 2019.
  7. ^ "THE BLACK MONEY (UNDISCLOSED FOREIGN INCOME AND ASSETS) AND IMPOSITION OF TAX ACT, 2015" (PDF). The Gazette of India. 27 May 2015. Retrieved 10 January 2019.
  8. ^ "Who is liable to pay income tax".
  9. ^ "Union Budget 2012: GAAR empowers I-T department to deny tax benefits to 'companies'", The Times Of India, 16 March 2012
  10. ^ a b c Jha S M (1990). "Taxation and Indian Economy". New Delhi: Deep and Deep Publications.
  11. ^ a b c "The evolution of income-tax". www.thehindubusinessline.com.
  12. ^ a b c d "EVOLUTION OF INCOME TAX SYSTEM IN INDIA" (PDF). Shodhganga.
  13. ^ "Information to be published under section 4(1)(b) of the Right to Information Act, 2005" (PDF). Central Board of Direct Taxes, Government of India. 10 December 2014. This article incorporates text from this source, which is in the public domain.
  14. ^ "PrCCIT Regions" (PDF). www.incometaxindia.gov.in.
  15. ^ a b "Who We Are?". www.incometaxindia.gov.in.
  16. ^ "Directorates" (PDF). www.incometaxindia.gov.in.
  17. ^ a b c d e "14 Interesting Initiatives by Income Tax Department that are making Tax Payers' Life Easy".
  18. ^ "OUR SEVOTTAM JOURNEY" (PDF). Department of Administrative Reforms and Public Grievances Ministry of Personnel, Public Grievances and Pensions.
  19. ^ "Sevottam for Ensuring Excellence in Services". PIB.
  20. ^ "Citizen's Charter 2014" (PDF).
  21. ^ "E-Nivaran is Modi's gift to tax payers: How does the scheme work?". Business Standard.
  22. ^ "The Union Finance Minister Shri Arun Jaitley Launches The "E-Sahyog" Pilot Project of The Income-Tax Department to Facilitate Taxpayers". PIB.
  23. ^ "Pre-budget consultations: Industry for tax cuts, more reforms to push investment". Indian Express.
  24. ^ "Income-Tax Dept holds outreach programme". The Tribune.
  25. ^ "Aayakar Seva Kendra opened". Business Line.
  26. ^ "Wondering Which Form To Use For Income Tax Return? Find Out Here". NDTV.
  27. ^ a b "Enforcement Directorate issues FEMA notices to forex, gold traders". The Economic Times. Retrieved 16 November 2016.
  28. ^ Rai, Arpan (11 November 2016). "Income tax dept conducts raids across India as illegal financial institutions crop up; shops call it a day". India Today. Retrieved 12 November 2016.
  29. ^ "Rs. 13.22 lakh in cash seized". The Hindu. 11 November 2016.
  30. ^ "Rs 4 Crore-Worth Scrapped Notes Seized From Maharashtra Trader".
  31. ^ "Rs 76 lakh cash seized from vehicle in Mandi – Times of India".
  32. ^ "Madhya Pradesh: Rs 4 crore-worth scrapped bank notes seized from trader". 12 November 2016.
  33. ^ "Rs. 73 lakh cash seized from two cars near Nashik". Retrieved 2 December 2016.
  34. ^ "Chhattisgarh: Cash worth Rs 44 lakhs in Rs 500, Rs 1000 notes seized from a man". Daily News & Analysis. 11 November 2016.
  35. ^ "Black money, informers crosses 4000". 20 December 2016.
  36. ^ "Rs 111.3 crore and counting: Here is a conservative list of new cash seizures reported post-demonetisation". 10 December 2016.
  37. ^ "I-T department seizes Rs 130 crore cash, jewellery post demonetisation". 6 December 2016.
  38. ^ "New notes worth Rs 4.7 crore seized in I-T raids in Bengaluru – Times of India".
  39. ^ "Bengaluru: In Indias biggest seizure since Nov 8, Rs 5.7 crore found – all in new Rs 2000 notes".
  40. ^ "Bengaluru: Rs 2000 notes worth over Rs 4 crore seized by Income Tax dept". 1 December 2016.
  41. ^ "After BJP leader Manish Kumar's arrest, Babul Supriyo washes hands off all linkages, calls it 'wasted time'". 7 December 2016.
  42. ^ Team, BS Web (7 December 2016). "Several BJP men caught with crores; Karnataka biggest hotspot for illegal cash transactions" – via Business Standard.
  43. ^ IANS. "Demonetisation: Rs 1.5 crore in new Rs 2,000 notes seized in Goa, two held".
  44. ^ "Over 900 new Rs 2000 notes seized from TN BJP leader who backed demonetisation". 2 December 2016.
  45. ^ "Biggest seizure of ₹142 cr cash, gold post demonetisation". Deccan Herald.
  46. ^ "Cash crunch? Rs 242 crore in new currency seized after demonetisation". 9 December 2016.