e-Verification Scheme Enhancing Voluntary Compliance: CBDT

The Income Tax Department has been taking several initiatives to encourage voluntary tax compliance and promote transparent tax administration. One such initiative is the e-Verification Scheme 2021, which was notified on December 13, 2021. The e-Verification Scheme is a progressive step towards facilitating voluntary compliance using information technology effectively.

The Scheme aims to share and verify financial transaction information with taxpayers, which appears to be either unreported or under-reported in their Income Tax Returns (ITRs). The Department has been collecting financial transaction information from multiple sources, and now the entire information is displayed to the taxpayers through the Annual Information Statement (AIS).

Through the AIS, taxpayers have the facility to object to any information if the source has misreported any such information. The Department confirms the information with the source, and if the source states that there is no error, the information is subjected to risk assessment for e-Verification. The entire process is digital, with notices issued electronically, and responses by the taxpayers submitted electronically.

The e-Verification Scheme is extremely beneficial to taxpayers as it enables them to explain financial transactions with evidence. It also helps in data correction and cleaning, thereby preventing proceedings on misreported information. The Scheme also provides an opportunity for taxpayers to correct/update income that may not have been appropriately reported in the ITR filed earlier. In other words, the e-Verification Scheme nudges taxpayers towards voluntary compliance by providing an opportunity to update their returns of income under section 139(8A) of the Income-tax Act, 1961.

The Department has taken up the e-Verification Scheme on a pilot basis for approximately 68,000 cases for financial transactions pertaining to FY 2019-20. Details of the transactions have been initially shared with the individual taxpayers through e-campaign. So far, e-Verification has been completed by the designated Directorate in approximately 35,000 cases, and remaining cases are under verification.

The Scheme has provided an opportunity for taxpayers to accept the mismatch of information vis-à-vis the original ITR filed. Many taxpayers have filed updated ITRs after availing the benefit of the Scheme. The e-Verification Scheme is a proactive step by the Department towards promoting voluntary compliance, improving data accuracy, and minimizing litigation.

To facilitate a better understanding of the Scheme and its various processes, CBDT has already issued a set of FAQs on the e-Verification Scheme 2021. Taxpayers are encouraged to go through the FAQs and utilize the Scheme for better compliance and transparency.

The e-Verification Scheme 2021 by the Income Tax Department is an excellent initiative to promote voluntary compliance, data accuracy, and transparency in tax administration. Taxpayers can utilize the Scheme to update their returns of income and avoid litigation. The Scheme’s benefits are many, and taxpayers are encouraged to take advantage of the same.

CBDT Press Release dt. 13/04/2023: e-Verification Scheme Enhancing Voluntary Compliance