What is the Taxpayer Charter?

The Union Finance Minister, presenting the budget proposals for FY21, emphasized an urgent need for the creation of a trust-based tax environment. The FM announced that a Taxpayer’s Charter shall be enshrined in the income-tax law. She proposed to amend the provisions of the Income-tax Act to mandate the Central Board of Direct Taxes (CBDT) to adopt a Taxpayers’ Charter.

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What is the Taxpayer Charter?

A charter, typically, is a unilateral measure by an authority and sets out the rights and privileges granted by the authority to its subjects. Usually, a Taxpayer’s Charter is supposed to safeguard the rights of a taxpayer however the conditions of the charter depend from one country to another.

In general terms, the following conditions are expected to be a part of the Taxpayer’s charter.

  1. It will enumerate the fundamental rights of taxpayers and the basic standards of services. 
  2. It is of paramount importance that such enumeration is not merely an abstract statement of ideals like fairness and integrity, but also includes enforceable rights, for example, an efficient and time-bound redressal mechanism for delays in refunds. 
  3. A taxpayer must also have the assurance that any information/data submitted to tax authorities will remain confidential, and won’t be used except as per legal requirements.
  4. There should be enshrining of the provision that media publicity that causes embarrassment to the taxpayer is to be avoided unless charges against the taxpayer are proven.

The Taxpayer charter will list out the fundamental rights of taxpayers and the basic standards of services that they should expect. The charter will aim to change the relationship between taxpayers and the tax department from being an enforcer to a facilitator. The department, on its part, will be expected to provide services that are fair and efficient.

Citizen Charter vs. Taxpayer Charter

It is noteworthy that a Citizens Charter does exist in India as part of the department of revenue’s mission, though its implementation in spirit is circumspect. Further, the Citizen’s Charter has no legislative backing and has not enumerated consequences in case of non-compliance. As a result, it failed to safeguard taxpayers’ interests so much so that most were not even aware of the contents of such a Charter. The FY21 budget has now extended legislative sanctity to such Charter by giving it statutory force.

Countries Which Already Have a Taxpayer Charter

There are only three countries in the world that have enshrined the rights of the taxpayers - Canada, the US, and Australia. India will be the fourth country to implement it as a statute. 





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