Income Tax Online

Can an Indian individual income tax payer manage his income tax payments and returns filing completely online? That's what I examine here in this post.

Returns forms online

Income tax forms have been available at the income tax web site for many years now. The Income Tax Department of India's web site is http://www.incometaxindia.gov.in/ . There are many other regional web sites such as http://incometaxdelhi.nic.in/ for New Delhi, http://www.incometaxmumbai.nic.in/ for Mumbai, http://www.incometaxbangalore.org/ for Bangalore. Unfortunately, as with many other government department web sites, there is no consistency in the way web sites are hosted: domain names differ; the way content is named and organized differs; and content itself (e.g., returns forms and versions) differs.

The site http://incometaxindiaefiling.gov.in/ is meant for e-filing of returns. The returns forms are available from http://incometaxindiaefiling.gov.in/portal/html/downloads.jsp .

TDS forms online

TDS forms such as Form 16 from an employer to an employee and Form 16A from a bank to an account holder still are given only in paper form. The IT department has not specified an XML schema in which these could be represented, a mechanism in which these could be digitally signed by the employer/bank, and electronically transferred to an employee/account holder. Once this happens an individual can use a software of his choice to consolidate the electronic TDS forms to prepare his return form.

Paying income tax online

Income tax can be paid online using the National Securities Depository Limited site https://tin.tin.nsdl.com/etax/Index.html . This site lists the following supported banks:

• HDFC Bank
• IDBI Bank
• State Bank of India
• Union Bank of India
• UTI Bank
  

I believe there would be other banks as well which support online income tax payment. You need to have an online account with the bank to pay taxes using money in your bank account.

Filing returns online

The PDF forms available from the Income Tax Department web site are editable and savable. You can generate XML files adhering to the schema from the department which can be submitted online. Complete instructions are available at http://incometaxindiaefiling.gov.in/portal/index.jsp . A FAQ is available from https://incometaxindiaefiling.gov.in/portal/html/faq.jsp .

The URL to submit the return file in XML format is https://incometaxindiaefiling.gov.in/portal/login.jsp . This is a secure web site which presents its certificate from "(n)Code Solutions - A Divsion of GNFC LTD". The root certification authority is CCA India. One can install the root certificate from the URL http://www.cca.gov.in/download2007.jsp . Many browsers may not include this root certificate by default and you may need to install this manually.

The XML schema for all forms is available from http://incometaxindiaefiling.gov.in/portal/downloads/schemas1234_Ver1.1.zip . There is another link as well: http://incometaxindiaefiling.gov.in/download/schema/ . I am not sure which is the latest, greatest, and correct one.

You need to have an account with the IT web site to submit your returns. The only information you need to provide to create an account is to provide your PAN number, your name, and your date of birth. The user ID for account is the PAN number. You can choose a password of your choice.

Upon submitting the returns XML file, you have an option of digitally signing it. If you don't sign digitally, you need to submit the ITR-V acknowledgment form duly signed at an income tax office.

If you don't have a digital signature, you can get one from the following approved authorities:

• Tata Consultancy Services Pvt Ltd
• National Informatics Centre
• Institute for Development and Research in Banking Technology
• MTNL
• Customs and Central Excise
• (n)CODE Solutions Limited
• Safescrypt

Of course, the process of obtaining a digital signature would take a few days which includes submission of various documents for identity and address proofs and verification. The income tax department accepts only Class 2 and Class 3 certificates. Such a certificate for an individual for an year would costs Rs.2245 with TCS (see, http://www.tcs-ca.tcs.co.in/enrollpopups/fee.htm). Other vendors may have different prices.

Software

For assessment years 2006-7, 2005-06, and 2004-05 (as far as I can remember), the income tax department had published a software called Sampark from Taxmann which could be used to compute the income taxes. This software would generate the filled returns forms and challans. For AY 2007-08 I couldn't find this software. What the income tax department calls "return preparation software" does not compute income tax: it's just the editable PDF form from which you can generate the XML file for submission.

So what are the alternatives? One could approach a chartered accountant or compute the taxes oneself using a spread sheet or some software application. One such application is Taxbase (http://sinewave.co.in/Products/Taxbase/Download.asp). I cannot comment on this as I have not tried this software.

This year, I see that there are some web sites which does this job. A few examples include the following:

• https://www.taxyantra.com/taxyantra/
• http://taxsmile.com/
• https://www.taxspanner.com/

I have not tried any of these. I have merely listed them here since it's difficult to find these sites together with a simple Google search. These sites charge a few hundred rupees depending on the nature of the return (e.g., income under how many heads).

It is amazing how far India has reached in its e-governance initiatives at least in the income tax department. What further can be done? I have a few suggestions:

• Provide income tax computation software such as Sampark
• Develop and publish schema for other forms such as Form 16 and 16A
• Encourage issue of digital signatures through employers to bring down costs
• Develop a portal with the following features:
• registration of tax payers (IT department can mail out passwords)
• ability to see TDS from employer and banks periodically
• reminder service for advance payment of taxes
  
• ability to compute, pay, and file returns online