The run up to the general elections in 2009 is likely to witness a slew of reforms which have a populist flavour. The aam aadmi waits for what he hopes is likely to be a Budget aimed at lowering his tax burden. Here are some suggestions.

1. IT RETURN FORMS:

A crucial area which needs to be looked at by the Government is the simplification of the tax return forms for individuals. In relation to the salaried taxpayer, it was claimed that the unique selling proposition of the forms was that they were paperless and less complex. Experience however showed that they were not as simple as was claimed to be, required more information to be furnished by the taxpayer and, in most cases, required the assistance of a tax consultant.

Since the new forms were valid only for assessment year 2007-8, one hopes that the forms introduced next financial year are relatively simpler. A related area which needs reform is the simplification of questionnaires issued to the taxpayer at the time of assessment. A mechanism needs to be introduced whereby questionnaires are customised for each assessee as opposed to a complex general questionnaire being issued to the assessee even when his case does not merit such detailed examination.

2. TAX OMBUDSMAN SCHEME:

The scheme allows an opportunity to make application for redressal of grievance to a person appointed by the government. The complaints typically relate to delay in issuance of tax refunds, non-acknowledgement of letters or documents, non-updation of demand and other registers leading to harassment of taxpayers, lack of transparency in identifying cases for scrutiny assessment, etc. However, there are some practical issues that need to be resolved for the scheme to be a success.

For example, the Indian ombudsman lacks legislative backing since the document governing it is a Central Board of Direct Taxes (CBDT) circular and could pose problems in enforcement and administration. The decision of the ombudsman is binding on the Income Tax Department but the odds of litigation cannot be ruled out. Further, most taxpayers are unaware of the tax ombudsman since the scheme has not been given due publicity.

3. RATIONALISING TAX SLABS:

Like always the one change which the common man would be wishing for would be a realignment and rationalisation of the income tax slabs. A closer examination reveals that the individual taxpayer is still subject to a higher effective rate of tax than most corporates, since an individual taxpayer does not enjoy nearly as many tax deductions as a corporate does. Further, slow processing of refunds by the department has also been an area of concern.

Over the past few years there has been a marked increase in tax compliance by individual taxpayers and a fair number of taxfriendly reforms being introduced by the government. It would be fair to say that individual taxpayers have kept their end of the bargain; time will tell if the Government keeps its end as well.

Mukesh Butani is the head of the direct tax and transfer pricing practice at BMR & Associates.

Nitin Baijal is a director at BMR & Associates and is an expert on individual and corporate taxation issues.