Govt to share income data with intermediaries in real time

Income tax planning is typically done near the close of the financial year, when there is little time to choose between tax-saving options such a home loan, pension contributions, equity-linked savings plans, or life insurance policies. Government is planning to share income data with intermediaries in real time

Now, technology may be able to help. Apart from data about your income and expenses, the Government intends to share individual tax records with specified organisations – tax-filing and tax-planning portals commonly referred to as e-return intermediaries (ERI) – on an ongoing basis.

This would be accomplished by granting API licences to a chosen group of companies. To put it another way, external organisations, such as a bank or your wealth management portal, would need to apply to the government for a licence to be authorised to collect  tax data from the government systems.

Read Also: GST made doing business easy, 90% of business feel: Survey

This is accomplished using a mechanism known as API, or Application Programming Interface. The goal is to assist intermediaries in providing financial advisory services.

According to reports, the tax agency is putting mechanisms in place to ensure that taxation, financial planning, and filing are all automated. Financial service companies such as banks, non-banking firms, financial advisors, and account aggregators, in addition to ERIs, can ask for access to individuals’ income-tax data.

Basically, the API is open to any middleman who can handle your money. This isn’t the first time the government has taken on such a project. The CBDT shared information between 2011 and 2015, and there was some misuse of personal income-tax data recorded and thats why CBDT withdrawn that facility.

Read Also: Tax Defaulters will be traced with drones and GST Number

What good will this do?

The technology will keep track of people’s spending habits and offer more tax-efficient methods to save.

For example, if you might save Rs 35,000 in taxes by taking out a home loan, the system will present you with such possibilities in real time, depending on your salary credits as captured by the income tax department using tax deduction at source (TDS) mapping.

If you do not take action, the system will send you an alert regarding possibly large taxes. When a home loan option is available, you can choose from a variety of options straight on the tax aggregator’s website.

Individual consent

ERIs must first get your consent due to the highly sensitive nature of personal income-tax data. The permission to share tax records data can be revoked at any time.

Once accepted, tax aggregators or financial services firms can provide automatic insights and even solutions based on a person’s financial transactions over time.

It’s critical to choose a service provider who has made the necessary investments in reliable and secure technologies.

Tax Compliances

There will be less problems when it comes to filing taxes. Typically, data is gathered from bank and share account statements prior to submitting tax returns to determine the tax due and how much to invest to save taxes.

A tax aggregator with your authorization to share data would be able to directly access your capital gains, interest generated, and investment information, assisting you in avoiding errors in estimating how much tax was deducted at source, as well as other problems in filing returns.

The tax department may benefit from this decision as well, as the service makes compliance easier and reduces tax evasion.