This system is meant to make financial planning for individuals easier as it would track their money habits and suggest better investment strategies to save taxes more efficiently. Notably, this was introduced in 2011-2015 and later withdrawn after reports of misuse of personal I-T data emerged.
In a bid to streamline taxation, financial planning and filing, the tax department is planning to share taxation records, income data and expenses of individuals with select e-return intermediaries (ERIs), said a report.
ERIs are portals which provide tax-filing and tax-planning services to individuals. They will have to get an API (Application Programming Interface) licence, which is granted to select companies to avail the information, an exclusive report by moneycontrol said.
The move will make financial planning for individuals easier as it would track their money habits and suggest better investment strategies to save taxes more efficiently.
More about the system
Apart from the ERIs, the tax department will also share the information with financial service providers such as financial planners, banks, non-banking firms and account aggregators. These institutions will have to apply for the API to get access to the income-tax data of individuals.
The government had introduced a similar initiative in 2011-2015, when such information was shared by the Central Board of Direct Taxes (CBDT). However, the service was discontinued after reports of misuse of personal income-tax data emerged.
At present, account aggregator networks are working at building solutions for individuals and it will take a few more months for them to come up with consumable solutions, Archit Gupta, Founder of tech company Clear, told moneycontrol.
Once the financial portfolio solutions are set up, individuals will be able to track all their banking, investments and tax account statements in one place, Gupta said.
How will this help individuals?
The system will provide individuals with tax-saving options on a real-time basis according to their salary credits through tax deduction at source (TDS) mapping that is captured by the Income Tax Department.
Financial services companies will also be able to offer automated insights and solutions to the individuals based on their financial transactions over the years.
The system will also alert individuals of situations where high taxes can be deducted failing action.
They can choose from the various options offered directly on the tax aggregator’s portal.
As the system is automated, the advisers will not have to apply their mind and use more technology to take care of individual requirements, moneycontrol quoted Sujit Bangar, Founder of Taxbuddy.com, as saying.
“The user gets seamless, tech-enabled, do-it-yourself experience in expert-assisted advisory,” Bangar said.
However, as personal income-tax data is very sensitive, ERIs will have to obtain the consent of the individual before using it. The consent to share tax record data can be withdrawn at any time.
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