As the July 31, 2023 deadline for filing Income Tax Returns (ITRs) for the financial year 2022-23 (assessment year 2023-24) approaches, the Income Tax Department is experiencing a surge in activity. Revenue Secretary Sanjay Malhotra has urged taxpayers to file their returns promptly, as the finance ministry is not considering an extension of the due date.
According to recent data, as of July 24, over 7.4 crore entities have already filed their returns, a notable increase of nearly 7 percent compared to the previous financial year. This number is expected to rise further even after the deadline passes, with late filers contributing to the tally.
The Do It Yourself (DIY) approach to filing returns is gaining popularity, especially among salaried taxpayers who primarily use ITR 1 (Sugam) and ITR 4 (Sahaj) forms. Archit Gupta, Founder and CEO at Clear, highlighted that the DIY trend is fueled by the pre-filling option and increased transparency from the government. The availability of application programming interfaces (API) for pre-filled data has streamlined the ITR filing process, reducing data entry for taxpayers.
The nature of employment appears to be a significant factor influencing the adoption of the DIY approach. Tier 1 taxpayers, particularly those who work at a desk, are more inclined towards DIY filing. Cities like Bengaluru, Gurgaon, and Noida show higher usage of the DIY method, while Delhi displays a lesser inclination towards it.
In addition to the DIY approach, there is a ‘Do it for me’ approach, where chartered accountants (CAs) use technology to file taxes for their clients more efficiently.
Notably, there has been a rise in the number of people using ITR 2 forms, primarily due to an increase in individuals earning income from trading via exchanges/brokers. This trend aligns with the significant growth in the number of active demat accounts in India, reflecting the surge in stock market participation.
Over the past decade, ITR filing has witnessed a significant transformation, with taxpayers becoming more diligent about adhering to deadlines. The availability of pre-filled data, such as Form 16, Form 26AS, and Annual Information Statement (AIS) report, has enhanced transparency and expedited refund processing.
The changing job landscape, with the emergence of freelancers and social media influencers, has also led to a diversity of income sources, necessitating ITR filing for these individuals.
Among other trends, there is an increase in nil ITR filings, where individuals declare no taxes paid during the financial year. Additionally, certain conditions may require individuals to file ITRs even if their income falls below the threshold, such as having assets outside India or depositing over Rs 1 crore in one or more current accounts with a bank or cooperative bank, among others.