It is axiomatic that buyers will have to be more watchful when sellers don’t take care. Human society’s strength is to function without relationships arising out of face-to-face contact. Traditionally, some interrelationship is taken for granted without direct interaction; the banker putting your interest of fixed deposit in the savings account as per instruction given, the taxman assessing income diligently, judges being just and policemen being evenhanded.
While we are a little more careful with the neighbourhood tuck shop with regard to change returned, the price charged, expiry date of products bought, we trust straightaway the functionaries of the government and the institutions at the basic level. Particularly this holds when the other side doesn’t stand to gain if there is a mess-up. The equation changes quickly when there is a better payoff for the party concerned.
But two relationships look immutably reliable—the bankers going about the job of handling your accounts and the taxman maintaining his records well. The taxman might have been misused for keeping the opposition in a tight spot or an uncooperative businessman in seething broth, but the average Joes are expected to be out of any witch hunt or gaming. The time for this naivete may be over if experience counts.
The pandemic led the government to extend the date of filing income tax returns to December 31, 2021. The effect of combining IT, better compliance, and the tax system functioning well resulted in tax information being accessible, form 26AS showing income earned and tax deducted at source being readily available. AIS (All Income Statement) can be perused and downloaded. Form 26AS has acquired the status of revealed scriptures not to be deviated from. Even charter accountants are wary of it and persuade you to accept them if it involves a small extra tax.
My roadblock started with the computation of interest. The banker sent me an interest certificate which anyone having knowledge in basic arithmetic equal to that of primates would find manifestly wrong. Income tax form 26AS showed interest earning of Rs 2,50,000 when at 8 percent interest on FD of Rs 2,50,000, it should be Rs 2 lakh only. The banker was sending a certificate for Rs 60,000 and revised it to Rs 80,000 once the mistake was pointed out. That is when I got down to work losing faith in the banker’s ability to furnish the right figure. I tried to do a Sherlock Holmes on the issue and knew that the problem would be elementary.
Sure enough, it turned out that one quarterly interest was repeated and shown separately with TDS. The chartered accountant was still diffident. I did the next elementary exercise. I got the bank statement for the period from April 1, 2020, to March 31, 2021. This was not my primary account and only the interest-earning from the FD used to be parked there. The computation showed Rs 1,95,000 as TDS was Rs 5,000 for the first quarter before furnishing the form 15G. Having cracked it, it was easy to solve the imbroglio involving two other FDs. Together the wrong calculation had increased my tax close to Rs 50,000. The accountant was still worried, but went by my instruction once the statement was furnished. However, that was not before he advised that the bank must be instructed to correct the figure.
Next came the capital gains. In long-term capital gains (LTCG), tax is paid on all gains beyond Rs 1 lakh. In essence, this is the exempted amount. The computer software provided by the IT department was automatically either calculating tax without exemptions or setting it off against the carryover loss in the short-term capital gain denying any future carrying over of loss of LTCG. Circumspect as he was, he told me to bear this small loss. I finally capitulated. But several worrisome questions still bother me.
Is it all a random unfortunate mix? Maybe, but too many things were happening to ignore them as a mere coincidence. It could be ineptitude at the level of the banker and computer programmer. That is why every attempt at simplification has proved to be an invitation to further complication. Does the taxman gain when more income is shown? Probably he does, in terms of more TDS collection and eventually more tax collection if one is not vigilant. It helps in burnishing the government data when the economy is not exactly in pink of health.
Does the banker gain? Perhaps yes, by pushing the problem away. If detected in time it can be blamed on the IT programme, and defective IT programme can be blamed on deficient programming. Eventually, everyone can get away with lazy working showing inflated earnings with impunity. All the players gain out of this mess-up, at least in the short term. The apathy of people involved and unreliability of technology handling can bleed the common man. As buyers of government services, we are better off being vigilant when the other side is not taking care.
(Views are personal)
Satya Mohanty
satya_mohanty@ediffmail.com
Former Secretary, Government of India