The CBDT has recently introduced a new e-Verification Scheme to make people follow the laws of taxation more willingly. Making tax administration more transparent, efficient, and user-friendly is a continuous process the government implements.

Introduction

The CBDT has recently introduced a new e-Verification Scheme to make people follow the laws of taxation more willingly. Making tax administration more transparent, efficient, and user-friendly is a continuous process the government implements. The principal purpose of the Scheme is to enable the targeted taxpayers to establish and rectify any inconsistencies with the declared income and financial dealings before attracting penalties or legal
repercussions.

What is the e-Verification Scheme?

The e-Verification Scheme is a digital system introduced under the Income-tax Act 1961. This Scheme entails using technology to authenticate other financial transactions stated and reported to the income tax department by other users, such as taxpayers. The Scheme uses data analytics and artificial intelligence to check what the taxpayer has declared and what others, like banks and financial institutions, have declared. If there is a discrepancy, the taxpayer is advised, if necessary, to explain why or how to eliminate it. This technique relies on rewards to encourage taxpayers to submit genuine financial statements, reducing reliance on audit and litigation.

Objectives of the Scheme

The e-Verification Scheme aims to achieve several key objectives:

• Promote Honest Reporting: The Scheme encourages taxpayers to report their income accurately by allowing people to fix mistakes voluntarily.
• Prevent Tax Evasion: The Scheme helps find cases where taxpayers might not report all their income, making it harder for people to evade taxes.
• Make the Process Clear: Using technology makes the tax process more straightforward, helping taxpayers understand what they need to do.
• Reduce Legal Disputes: By allowing taxpayers to fix errors without involving courts, the Scheme helps reduce the number of legal disputes.

How Does It Work?

• Gathering Information: The Income Tax Department gathers information on financial transactions from various sources like banks, other governmental
  organizations, etc.
• Analyzing Data: This information is used to compare what taxpayers have declare to the one these sources have recorded.
• Notifying Taxpayers: However, if a difference is identified, the taxpayer is notified.
• Taxpayer’s Response: The Web response option allows taxpayers to either agree with the details reported or provide reasons for a variation.
• Resolving Issues: Depending on the answer provided by the particular taxpayer, the problem is solved, or the appropriate action is continued if the problem still exists.

Benefits of the Scheme

• Ease of Use: Taxpayers can handle issues online, making it more convenient without visiting tax offices.
• Faster Resolution: Technology helps quickly find and fix discrepancies.
• Lower Costs: By reducing the need for detailed audits, the Scheme saves taxpayers and the government money.
• Encourages Honesty: The Scheme motivates taxpayers to report their income accurately.
• Better Experience: The Process is simple and non-intrusive, making it easier for taxpayers to comply with tax rules.

Conclusion

The e-Verification Scheme is a significant step towards modernizing tax administration in India. It aids in quickly correcting mistakes and makes taxpayers abide by tax laws without much pressure. It also makes settProcessxes easier, less cumbersome, and understandable, breeds trust between a taxpayer and the revenue bodies, and therefore enhances compliance.

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