In a recent notification that carries significant implications for taxpayers across the country, the Directorate General of Income Tax (Systems) has issued guidelines under Rule 14 of the Centralized Processing of Returns Scheme, 2011. 

Notification No. 05 of 2022, dated 29th July 2022, delineates the specific time frame within which the verification of Income Tax Returns (ITR) must be completed after the return is electronically filed. 

This critical update is poised to affect small business owners, MSMEs, professionals, and students who file income tax returns.

Income Tax Returns – Key Highlights of Notification No. 05 of 2022

The notification issued by the DGIT (Systems) mandates that the verification of an electronically filed ITR must be completed within 30 days from the date the return is transmitted online. The comprehensive details of this directive are as follows:

1. Verification Timeframe:

• Within 30 Days: If the ITR is uploaded and the electronic verification (e-verification) or ITR-V (Income Tax Return Verification form) is submitted within 30 days from the date of uploading, the date of uploading the return will be considered as the official date of furnishing the return.
• Beyond 30 Days: If the ITR is uploaded but the e-verification of ITR-V is submitted after the 30-day window, the date of submission of the e-verification of ITR-V will be treated as the date of furnishing the return. Consequently, any applicable penalties or consequences of late filing under the Income Tax Act will apply.

1. Submission Process:

The ITR-V, in its prescribed format, should be sent either through ordinary or speed post, or any other mode, to the following address:

Copy code

Centralised Processing Centre,

Income Tax Department,

Bengaluru – 560500, Karnataka.

1. Effective Date:

This notification will come into effect from 1st April 2024 and will apply to all returns of income uploaded or submitted on the e-filing portal (www.incometax.gov.in) from that date onwards.

1. Consequences of Non-Verification:

Returns not verified within the specified timeframe will be deemed invalid, leading to significant repercussions for taxpayers.

1. Advisory for Assessees:

It is strongly advised that taxpayers complete the e-verification process immediately upon filing their return to avoid any inadvertent delays or complications.

Analytical Perspective on the New Guidelines

It is essential to consider the broader impacts on various stakeholders, particularly small business owners, MSMEs, professionals, and students.

Benefits of the New Verification Rules

• Streamlined Processing:

The specified timeframe encourages prompt verification, which can expedite the overall processing of returns. This can result in faster refunds and quicker resolution of any discrepancies.

• Enhanced Compliance:

A clear deadline fosters better compliance among taxpayers. Knowing that their returns could be invalidated if not verified on time will likely motivate taxpayers to adhere to the timelines, thereby enhancing overall compliance rates.

• Reduction in Administrative Burden:

For the Income Tax Department, having a fixed window for verification can lead to a more efficient processing system, reducing the administrative burden and allowing for better resource allocation.

Drawbacks and Challenges

• Increased Pressure on Taxpayers:

The 30-day verification period may place additional pressure on taxpayers, particularly those who are not well-versed with the online verification process or those who may face technical issues.

• Potential for Higher Late Filing Penalties:

Taxpayers who miss the verification deadline will face penalties for late filing, which could lead to increased financial strain, especially for small businesses and individual taxpayers.

• Dependency on Postal Services:

For those opting to send the ITR-V by post, delays in postal services could inadvertently cause the taxpayer to miss the deadline, resulting in their return being considered invalid.

For those new to filing tax returns, including students and first-time filers, it is advisable to seek guidance from tax professionals or use the resources provided by the Income Tax Department to ensure compliance with the new verification rules.

Conclusion

The issuance of Notification No. 05 of 2022 by the Directorate General of Income Tax (Systems) marks a significant step in streamlining the tax return verification process. 

By mandating a 30-day timeframe for the completion of verification, the Income Tax Department aims to enhance compliance, reduce processing delays, and ensure a more efficient tax administration system. 

While the new rules present certain challenges, particularly in terms of increased pressure on taxpayers and dependency on postal services, the benefits of faster processing and improved compliance far outweigh these drawbacks.

Taxpayers are urged to familiarize themselves with the e-verification process and adhere to the specified timelines to avoid penalties and ensure their returns are processed smoothly. For small business owners, MSMEs, professionals, and students, staying informed and prepared is key to navigating these changes effectively.

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