In a bid to promote voluntary tax compliance and enable transparent and non-intrusive tax administration, the Income Tax Department introduced the e-Verification Scheme, which was announced on December 13, 2021.
The Income Tax Department recently tweeted saying, “e-Verification Scheme has been introduced by ITD to encourage voluntary tax compliance & facilitate a transparent & non-intrusive tax administration. Using technology, information of such financial transaction is shared with taxpayers as is unreported/under-reported in the ITR.”
Information on financial transactions relating to 68,000 cases from FY 2019–20 were selected for e-Verification on a pilot basis, out of which, approximately 35,000 cases of e-Verification were completed.
“On a pilot basis, in about 68,000 cases, information of financial transactions pertaining to FY 2019-20 has been taken up for e-Verification. Details of the transactions have been initially shared with the individual taxpayer through e-campaign. So far, e-Verification has been completed by the designated Directorate in approximately 35,000 cases, and the remaining are under verification,” the ministry of finance said in a release.
How is it beneficial to taxpayers?
The e-Verification Scheme facilitates voluntary compliance using information technology effectively. The Scheme is beneficial to taxpayers since it enables them to provide proof to support their explanation of a financial transaction. It also aids in data cleaning and rectification, preventing the start of legal action based on inaccurate information. Since the taxpayer is given access to information about the financial transactions, there is a chance to update or correct income that may not have been properly reported in the ITR that the taxpayer filed.
“In other words, as the e-Verification Scheme makes the taxpayer aware of the risks, it nudges him/her towards voluntary compliance by providing an opportunity to the taxpayer to Update the return of income under section 139(8A) of the Income-tax Act,1961,” the release mentioned.
Several taxpayers have filed Updated ITRs as a result of the Scheme's opportunity for them to accept information that differs from the originally filed ITR.
According to the FAQs on the income tax department’s website, the scheme aims to correct inaccuracy in data/information provided by Source/Reporting Entity. It also helps to inform the taxpayer about any transaction which could have been missed in computing income and taxes, and in filing Return of Income.
It gives an opportunity to the taxpayer to correct any omissions in the Return of Income by filing an updated return of Income and paying the tax due on the income missed in the original Return of Income. To provide an opportunity to the taxpayer to explain a transaction being verified before any further action by way of Assessment or Re-assessment is undertaken.
Is the e-Verification Scheme same as e-Verification of return?
The e-Verification Scheme 2021 is completely different from the e-Verification of return. According to the Income Tax department FAQs, “After filing the income tax return (ITR), you need to verify it to complete the return filing process. Without verification within the stipulated time, an ITR is treated as invalid. e-Verification is the most convenient and instant way to verify your ITR. You can e- Verify your return online using OTP on mobile number registered with Aadhaar, net banking, digital signature etc. ”