Changes to the rules to allow taxpayers to update their tax returns after they have initially filed them had led to 500,000 people re-filing, raising an additional Rs 400 crore ($49m), the Indian government has revealed.
The Finance Act 2022 introduced the idea of updated returns, which allows taxpayers to update their tax return within two years of filing it, subject to the payment of taxes.
New form ITR-U was made available in May this year for taxpayers to update their income tax return (ITRs), with any income or earnings that may have been missed in the original filings for fiscal years starting 2019-20 (the assessment year 2020-21).
A government official said that compliance had improved substantially and that corporate companies, as well as individual taxpayers, are filing updated income tax returns.
“Data showed that one company has filed an updated return and the amount of tax paid was Rs 1 crore ($122,000). This shows that there is voluntary compliance now and people want to pay tax and stay clean,” he added.
Taxpayers filing this form, which can be filed within two years of the end of the relevant assessment year, have to give reasons for updating it.
The Budget 2022-23 has permitted taxpayers to update their ITRs within two years of filing, subject to payment of taxes, a move aimed at helping correct any discrepancy or omissions. A taxpayer would be permitted to file only one updated return per assessment year.
The battle with inflation
India’s Monetary Policy Committee (MPC) has retained its projections that retail price inflation will rise at the rate of 6.7% for the current financial year, although it has raised it slightly by 10 basis points for the third and fourth quarters each.
Second-quarter inflation was slightly less that the MPC predicted, at 7.04% – it has put the figure at 7.1% in its September review. The MPC expected the Q3 inflation figure to be 6.6%, and for Q4 in predicted a rate of 5.9%.
The committee has also cut its projections for economic growth rate in India by 20 basis points to 6.8% for the current financial year, even though the second quarter it was 6.3%, as the MPC had forecast.
Economic growth projections for the third and fourth quarters were slashed by 20 basis points and 40 basis points to 4.4% and 4.2% respectively.
The economy grew by 13.5% in the first quarter of the current financial year, lower than the MPC’s projection of 16.2%, forcing the panel to cut the projections for the full year growth to 7% from 7.2% in its September review.
The committee said the Indian economy was facing tough conditions “from protracted geopolitical tensions, tightening global financial conditions and slowing external demand”.
Robust and broad-based credit growth and the government’s thrust on capital spending and infrastructure should bolster investment activity, it said.
Interest rates hiked
In another development, India’s central bank has raised interest rates to 6.25% as it looks to get to grips with inflation.
“The MPC decided by a majority of five members out of six to increase the policy repo rate by 35 basis points to 6.25%, with immediate effect,” said Reserve Bank of India (RBI) Governor Shaktikanta Das.
The new measure is aimed at tackling inflation in India, which “still remains above the upper tolerance band of the target” despite falling as expected to 6.8% year-on-year in October, Das added.
“Despite this downward revision, India will still be among the fastest growing major economies in the world,” he said.
Das said that “the world economy was mired in uncertainty due to the impact of the war in Ukraine – which has caused energy and food prices to rise – following the coronavirus pandemic”.
He commented: “While no country is spared the ill-effects of such large shocks, emerging market economies (EMEs), especially the ones dependent on food, energy and commodity imports, have been the worst affected.”