Is it possible to get rid of income tax return filing?

A frustrated reader asks, “Sir, I finally managed to file my ITR this time after several attempts. Why do we have to go through this exercise each year? Is it possible to get rid of it?”It may be possible to eliminate many (certainly not all) return filing compliance requirements, but how many of us are ready to accept the consequences? I am fairly sure many would dismiss the following as naive. Take, for example, the case of a salaried employee with capital gains and some fixed deposits.Already, the government knows the person’s full salary. Suppose it mandates that all capital market-linked redemptions be reported to the income tax office (this includes all trades in a broking account etc.). Suppose all SB account, FD and RD details (just the interest for a financial year- which anyway needs to be declared) linked to the PAN are also reported.Just to be clear, there is no loss of privacy here. Only data that must be declared is reported by the institution handling the funds.The taxman now has all the necessary information to compute the tax and send a demand for it. This can be sent each quarter (coinciding with the advance deadlines), and the final demand for any leftover tax by the first week of April.Then the assessee only has to ensure the demand is fully paid and ensure by the end of the financial year, any leftover tax (from unreported transactions) is paid. There can be a grievance redressal mechanism for any excess demand.In this digital age, this is easily possible when most transactions are digital. Sure, there will be hiccups, as always, which can be ironed out in time.Already we are moving towards a new tax regime where almost all tax deductions are defunct. This makes the process of sending out tax demand so much easier. Once the system starts running smoothly, there would be no need to “file” IT returns for applicable individuals, and unless there is a mistake in the demand, there is no need for refunds.Yes, if one has rental income, business income or professional income, return filing is still necessary, but even in these cases, the demand mechanism would significantly reduce effort. In such cases, the return filing can be made interactive without jargon and eliminate different forms (ITR1,2,3,4, etc.). We have already taken a significant step toward this.Post office deposits, insurance policies and RBI bonds should also come under periodic reporting for this work. Naturally, it is easier said than done, but it is, in principle, quite possible. We have all the fintech know-how to get it done. 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