Tax return filing any time, but with penalty

A taxpayer will be able to file their returns at any time, even after deadlines, by paying a penalty for the delay and interest on the payable amount, as the revenue authorities aim to reduce harassment of taxpayers, according to officials familiar with the initiative.

In such cases, taxpayers will not be required to seek a time extension.

Sources at the National Board of Revenue (NBR) said it may bring such a change to the tax collection system in the upcoming national budget. In this case, there may be some changes in the penalty and interest rates.

The revenue regime is taking the initiative to reduce the "authoritarian power" currently exercised by tax officials when individuals file time petitions or submit their returns after the deadline without obtaining a time extension.

Experts have welcomed the initiative and said it will create an opportunity to reduce the harassment of taxpayers and encourage them to submit tax returns.

"When taxpayers apply to deputy commissioners of taxes for a time extension, the applications lie unmoved for some time. Sometimes, they do not even respond. In some cases, the files are sent to joint commissioners or commissioners, causing harassment," Syed Md Aminul Karim, former NBR member of income tax policy, told The Business Standard. 

"Furthermore, if the file involves a significant amount, it will be sent to higher authorities, and the tax officials will assess it as they wish. For instance, if the tax amount is Tk10 lakh, they may assess it as Tk20 lakh. However, this opportunity for manipulation will decrease once the new system comes into force," he added.

Despite the increase in the number of Tax Identification Number (TIN) holders in the country, the number of tax return filings is not increasing at the expected rate. 

In the current budget, the government has made the proof of submission of returns mandatory while availing 38 types of services. It was thought that there would be a huge response in filing returns, but in reality it did not.

As per NBR calculations, the current number of TIN holders in the country is 90 lakh. As many as 32 lakh people filed tax returns last year, of which about three lakh applied for a time extension.

Currently, November 30 is the last day for tax return submission, which is treated as Tax Day. If any assesse fails to file within the time limit, they have to file an application with proper cause to a deputy commissioner of taxes for up to two months.

Officials concerned said that if taxpayers cannot submit the return on time for any reason and if the application is not made in time, he does not get the opportunity to submit the return in the universal self-assessment system. 

Then taxmen hold the power to assess the return and the taxpayer is called for hearing in many cases. At this time, he is sometimes asked for various documents. If the taxman is not satisfied, additional tax is imposed during the assessment.

This is on top of the penalty and interest on payment tax.

According to existing income tax ordinance, if an individual fails to file a tax return without reasonable cause, then he will have to pay a penalty at a rate of 10% of the previous year's income tax or Tk5,000 whichever is higher. If this continues further, then this penalty will increase.

In such cases, as taxmen have authoritarian power, the penalty can be changed.

Besides, pay a delay interest at the rate of 2% per month on the difference between the tax assessed on total income for the assessment year and the tax paid in advance for the assessment year, including the tax deducted or collected at source. 

However, a field-level deputy commissioner of taxes told TBS on condition of anonymity, "If seeking a time extension is not made mandatory, there may be a decline in interest among taxpayers to file returns."