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Taxpayers Charter will be enshrined into laws-Budget 2020


Enshrinement of Taxpayers' Charter into the law itself is one of the most laudable provisions introduced by the Finance Minister Nirmala Sitaraman in her Union Budget 2020.

With the objective of enhancing the efficiency of the delivery system of the Income Tax Department, the Union Budget proposed to amend the provisions of the Income-tax Act to mandate the Central Board of Direct Taxes (CBDT) to adopt a Taxpayers’ Charter

The Finance Minister said, “The details of the contents of the taxpayers' charter shall be notified soon.” She emphasized that any tax system requires trust between taxpayers and the administration. She further said that this will be possible only when a taxpayer’s rights are clearly enumerated.

Para 81 of the Budget Speech, related to governance, is all about the introduction of Taxpayers' Charter and is reproduced below-

81. Hon’ble Speaker, Sir, all the while I have explained the colour and composition of the bouquet of flowers – schemes and programmes. They were grouped under Aspirational India, Economic Development and Caring India. Now I speak about the two hands that will hold them. One such hand is Governance – clean, corruption-free, policy driven and good in intent and most importantly trusting in faith. Trusting every citizen, the aspirational youth, the hard-working women, the risk-taking entrepreneur, the ever hopeful and untiring farmer or the wise and old senior citizen. Many among them are taxpayers. Others may not be taxpayers today. Our Prime Minister has laid before us Ease of Living as a goal to be achieved on behalf of all citizens. An important aspect of both ease of living and ease of doing business is fairness and efficiency of tax administration. We wish to enshrine in the statutes a “taxpayer charter” through this budget. Our government would like to reassure taxpayers that we remain committed to taking measures so that our citizens are free from harassment of any kind.
[emphasis added]

While delivering the speech on Direct Tax Proposals, she said,"any tax system requires trust between taxpayers and the administration. This will be possible only when taxpayer’s rights are clearly enumerated. Towards this end, and with the objective of enhancing the efficiency of the delivery system of the Income Tax Department, I propose to amend the provisions of the Income Tax Act to mandate the Central Board of Direct Taxes (CBDT) to adopt a Taxpayers’ Charter. The details of the contents of the charter shall be notified soon."

Further, para 4.3 of the 'Annex to Part B of Budget Speech' reiterates that with the objective of enhancing the efficiency of the delivery system of the Income Tax Department, it is proposed to provide that the CBDT shall adopt a Taxpayer’s Charter and issue necessary direction for the implementation of the Charter

Further clause 64 of the Finance Bill, 2020 proposes to insert a new section in the Income Tax Act, 1961 mandating the CBDT to notify the Taxpayers' Charter.

64. After section 119 of the Income-tax Act, the following section shall be inserted, namely:–

Taxpayer’s Charter.
 “119A. The Board shall adopt and declare a Taxpayer’s Charter and issue such orders, instructions, directions or guidelines to other income-tax authorities as it may deem fit for the administration of such Charter.”

Thus, Clause 64 of the Bill seeks to insert a new section 119A so as to empower the Board to adopt and declare a Taxpayer’s Charter and issue such orders, instructions, directions or guidelines to other income-tax authorities as it may deem fit for the administration of such Charter.

This amendment will take effect from 1st April, 2020.

No time frame is prescribed by which the Taxpayers' Charter is required to be notified by the CBDT. However, CBDT Chairman Pramod Chandra Mody said the charter will be notified very soon and once operationalized, India will be only the "third or fourth" country to have such a tax administration.

He further said that the Taxpayers’ Charter announced in the Budget will have statutory status and it will “empower” citizens by ensuring time-bound services by the Income-Tax Department. 

A taxpayers' charter has become indispensable in India since the income tax is department is going faceless and in the coming years, it will become fully digital. In such a case,  the taxpayers' charter becomes inevitable to redress the taxpayers' grievances and stop the harassment of the taxpayers. A time-bound manner of completion of tasks will be the need then.

This is the first time when the Taxpayers' Charter will be enshrined into the law itself. After the budget presentation, during a press conference, the Finance Minister told the reporters that only three countries have done this before, the US, Canada, and Australia. 

She further added,'' Ultimately, it gives a sense of confidence to a taxpayer. Some of the things which will be part of the charter are something she can seek for comfort. Anything being done is as per protocol. Anyone's personal whims and fancies don't govern it and at the end of the day, when a tax matter gets closed, it gets closed completely."

When she was asked that she had also put in clauses to limit over-reach of agencies. If she thought that would comfort the industry.

She replied in affirmative and added,"We are not just going about saying we trust you, we love the honest taxpayers, we respect wealth creators'. We are putting it into law. That you have a right and we recognise it. I would think, strictly speaking, tax concessions are important, it helps people to have more money in their hands. But a charter tells you India is at par with some of the best countries in treating their citizens. The PM very clearly said 'this has to be done'.".

Once enshrined into the law, rights in taxpayer charter would be enforceable. The Income Tax Act, 1961 has put many obligations on a taxpayer like a time limit to pay the taxes, to file a return of income, assessment, filing of appeals, etc. However, on the other side, no such obligation is there on the income tax department except in a few specific matters. The time limit to process a return of income once a taxpayer files it, the time limit within which refund will be issued, reply to any communication, and any other matters are required to be incorporated in the proposed taxpayers' charter.

CBDT Chairman informed that the Taxpayers'' Charter would be provided to all the taxpayers irrespective of their categories such as individuals or corporate entities.

He further added that the tax department is of the view that the tax law imposes certain obligations on taxpayers and hence there should be a corresponding obligation on the part of the tax authority. Further, there is a need to create an atmosphere of trust between tax administration and taxpayers.

What is meant by the Taxpayers' Charter?

The Taxpayers' Charter outlines a taxpayer's rights and obligations. It explains what a taxpayer can expect from the tax administrators. A taxpayer charter builds a relationship of mutual trust and respect between the taxpayers and the tax authority. It enhances the standard and quality of services of the tax administrators.

The taxpayers have the right to claim the services from the tax authority. Simultaneously, the tax authority expects every taxpayer should discharge their obligations in a time-bound manner and disclose the correct and true income.

A taxpayer charter contains both the taxpayers' rights and taxpayers' obligations.

Citizen's Charter of the Income Tax Department

Presently, the income-tax department has voluntarily released the 'Citizens' Charter outlining its commitment towards taxpayers. This charter is a policy-oriented matter and has no legal force.

The Citizens' Charter is a guiding rule book for the income-tax department and its officials. The present Citizens' Charter was released in 2014 to replace the  Citizens' Charter of 2010.

Department had revised its Citizen’s Charter to reflect the endeavor of the Department to meet the aspirations of the people of India. The present Citizen's Charter is nothing but lay down standards of service delivery to taxpayers.

The policy on service quality of the income tax department towards taxpayers is reproduced below-


The Income Tax Department is committed to promote voluntary compliance with Direct Tax Laws through quality taxpayer service and firm administration.

The Department endeavours to be transparent and fair in its processes. It consistently strives for providing efficient services and assisting the taxpayers to discharge their tax obligations. It aspires for continual improvement in its service delivery mechanism by upgrading the infrastructure and skill sets of its employees for ensuring the desired level of taxpayers' satisfaction.

The Department is resolute in complying with the requirements of IS 15700:2005 and continually improving the effectiveness of the Service Quality Management System.

The Citizen's Charter, 2014 outlines the vision, mission, standards of service quality.

Even as a policy, the charter is in existence but the most surprising fact is that many taxpayers as well many tax consultants are unknown about it. Over and above, the shocking fact is that many ITOs are unaware of the existence of such charter despite the fact that in many income-tax buildings posture of Citizens Charter is hanged. No ITOs ever bother to follow the charter due to the fact that the same has no legal force.

Time to time CBDT had to remind the ITOs about the service quality as per the charter. 

In this context, a reminder from CBDT to the CITs in 2014 is cited. In 2014, CBDT had issued an Instruction to the Chief Commissioners stating that though the Citizens Charter prescribes a time limit of one month for a decision u/s 197 on the application for no deduction of tax or deduction of tax at a lower rate, there is considerable delay in issuing the lower/non-deduction certificate. 

The CBDT had directed that the commitment to taxpayers as per the Citizens Charter must be scrupulously adhered to by the Assessing Officers and all applications for lower or no deduction of tax at source filed u/s 197 of the Income-tax Act, 1961 must be disposed of within the stipulated time frame.

It never happened. Unless a bribe is given, no lower TDS certificate u/s 197 was issued following the timeframe as per citizens charter. The harassment and exploitation of taxpayers continued. Forget about the lower TDS certificates, even the time frames for other services was never followed by the tax officers.

Now the department is moving towards a faceless environment and the physical interaction between the taxpayers and the tax officers is going to end, such a Taxpayers' Charter with legal enforcement is the need of the hour.

The Taxpayers' Charter is yet to be notified. In the absence of the text of the charter, nothing can be commented upon now. However, the proposal to incorporate the Taxpayers' Charter in the Income Tax Act itself is indeed a welcome step. Finance Minister deserves real compliments for this fundamental initiative.

The charter must be implemented strictly and with the right intention to make the same successful, unlike the present Citizen's Charter. In the digital environment, it seems possible.

Download the Citizen's Charter of the Income Tax Department

Download Citizen's Charter 2014
Download Citizen's Charter 2010

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