Simplifying Taxes: How the E-Verification Scheme Encourages Voluntary Compliance

Filing taxes can be a daunting task, but the Indian government is making strides towards a more transparent and taxpayer-friendly system with the E-Verification Scheme launched in December 2021. This scheme aims to nudge taxpayers towards voluntary compliance by leveraging technology and clear communication.

Here's how the E-Verification Scheme works:

• The Income Tax Department collects information about your financial transactions from various sources like banks and investment firms.
• This data is then reflected in your Annual Information Statement (AIS), accessible through the department's website.
• When you file your Income Tax Return (ITR), the department compares the information you provide with the data in your AIS.
• If there are any discrepancies, the department will reach out to you through an e- campaign. This communication highlights the mismatch and provides an opportunity to rectify it.

Benefits of the EVC Scheme for Taxpayers:

• Transparency: The scheme promotes transparency by allowing taxpayers to see the financial information the department has on record. This empowers you to ensure its accuracy.
• Voluntary Compliance: By highlighting discrepancies early on, the scheme encourages you to voluntarily update your ITR if there are any mistakes. This reduces the risk of penalties and audits later.
• Convenience: The e-verification process is convenient, allowing you to rectify errors online without extensive paperwork.

Benefits of EVC Scheme for Tax Administration:

• Improved Accuracy: The EVC Scheme helps ensure the accuracy of tax information, leading to a more robust tax collection system.
• Reduced Evasion: By highlighting discrepancies, the scheme discourages tax evasion and promotes voluntary tax compliance.
• Efficient Administration: Identifying discrepancies upfront allows the department to focus its resources on more complex cases.

Important points to remember:

• If you receive a communication regarding a mismatch, you have a window to file an updated return (ITR-U) with the correct information.
• The deadline for filing an ITR-U for the Assessment Year (AY) 2021-22 (Financial Year 2020-21) is March 31, 2024.

Conclusion:

The E-Verification Scheme is a positive step towards fostering a more transparent and efficient tax administration system. By taking advantage of this scheme, taxpayers can ensure accurate tax filing and avoid potential penalties. Remember, timely communication and addressing discrepancies will benefit both taxpayers and the government in the long run.