Income Tax Return filing Fees may find the place in Union Budget – 2023?


Income Tax Return filing Fees may find the place in Union Budget – 2023?


Finance Minister Nirmala Sitharaman is seeking suggestions from stakeholders for its annual budget for 2023-24 to be presented in the parliament on 1ST Feb 2023. Every budget is a time to introspect and retrospect and explore the possibility of generating additional revenue so as to achieve its social economic objectives.

Another one in the pipeline could be the introduction of the “Income Tax Return filing Fees”

The present income tax return filing process is coupled with following facts:

  1. The rise in the tax collection figure by around 25%
  2. Highest ever income tax payers since long.
  3. The increased in the person with annual income exceeding Rs 5 crore.

Media report suggests that the basic exemption limit is likely to be revisited this time. This may be the last budget of the Modi Government 2.0 as 2024 will be an election year and the full fledged budget may not be there next year.

Revising the basic exemption limit to Rs. 4 Lakh or 5 Lakh for individual/HUF may result in the reduced revenue for the Exchequer. To compensate this, an alternative resource mobilization tool will be must.

One may recall that the non tax-paying population has also suddenly increased after the income tax Act which has incorporated section 87A. It may be noted that section 87A provides that the entire tax would be offered as rebate if the income doesn’t exceed Rs. 5 Lakh. Similarly, individuals /HUF are required to file the return even if they have loss in the business or under other source if they intend to have the benefit of carry forward of such loss.

As far as partnership firm, trusts and companies are concerned, they are required to file the income tax return compulsorily even if they don’t have taxable income or not required to pay the tax for the reason that their income is nil.

In short, there are numerous cases wherein the income tax return is filed but no tax is paid to the Government treasury.

Every return filed has an administrative cost like its acceptance, processing, communication, Updation, etc. And all this is done by the income tax department without a single rupee of collection from the taxpayer

To overcome this, the Government may plan to introduce the concept of “Return filing fees” wherein a minimum filing fees of RS. 1000/- for Individual taxpayers and Rs. 5000/- to Rs. 10,000/- for firms and companies may be introduced in the Budget-2022.

As a result of this, the Government may likely be able to generate consistent revenue of around 3000 Cr. This will also be used as a tool of ensuring quality data and return by the department as unwanted return filing would be curtailed after the return filing fee concept is introduced.