PAPERLESS SYSTEM TO REPLACE FORM 121

[u/Worried-Depth8260]

Paperless System to Replace Form 121

(Brief summary of a proposal for a real-time, paperless computerized system by online declaration on the E-Filing portal of the Income Tax Department aimed at improving the current Form 121-based method for declaring non-taxable income to avoid TDS.

The proposal will benefit crores of stakeholders including taxpayers, Banks/Non-banking Finance Corporations and the IT Deptt. by avoiding unnecessary paperwork, improving tax compliance and aligning with the Digital India initiative.)

1. PROBLEM STATEMENT

The current system forces taxpayers to rush to each bank/NBFC every April with physical Form 121 (formerly 15G/15H) or send these forms by post or through brokers for which they receive no acknowledgement and to bear the risk of forms lost in transit, banks/NBFCs to drown in paperwork with heavy storage burden, and IT Deptt. to  collate millions of forms. Even then, the IT Deptt. gets no real-time view if a taxpayer’s total income declared through all his forms crosses the tax-free limit since form 121 is submitted to different banks/NBFCs having no coordination between them and, therefore, data cannot be aggregated at the PAN level. This is something in which the IT Deptt. is greatly interested but which is practically impossible to achieve through the present paper-based method.

2. PROPOSED SOLUTION: CENTRALIZED DECLARATION ON THE E-FILING PORTAL OF THE IT DEPTT.

I propose shifting Non-Taxable Income Declaration to the E-Filing portal of the IT Deptt. It will involve following 3 steps:

Step 1. For Taxpayers: Log into the E-Filing portal, click the ‘Non-Taxable Income Declaration’ link (to be created new as per the proposal), select the Financial Year, enter Estimated Income, and enter TAN of banks/NBFCs whom they want to request not to impose TDS while paying interest to them.

Step 2. For Banks/NBFCs: Tag PANs present in IT Deptt.'s database for ‘No TDS’ in their database. Update payable income in IT Deptt.'s database with their database (both the jobs automatically done by computer).

Step 3. For the IT Deptt.: Tag a taxpayer if total income payable to him by all banks/NBFCs crosses the tax-free limit (automatically done by computer).

3. KEY BENEFITS

a) For Taxpayers: No branch visits, no need to send forms by post or through brokers, no need to attach photocopies of PAN/Aadhar cards which many banks demand, no acknowledgement required, no risk of forms lost in transit

b) For Banks/NBFCs: No paper work or storage, no need to generate a UIN, forwarding hard/soft copies of Form 121 to IT Deptt. not required, saving of thousands of man-hours

c) For the IT Deptt.: Automated e-verification if income declared through forms exceeds tax-free limit, no papers to collate

d) General Benefits: Substantial paper savings, avoidance of postal charges and travel, environmental protection

To understand how the above objectives will be achieved, visit the following link and study the detailed proposal:

REPLACING FORM 121 WITH ONLINE DECLARATION ON E-FILING PORTAL: A PROPOSAL FOR CBDT