Taxpayer Charter 2020 - India's proposed tax reform

The "taxpayer charter" is a proposal to improve the enforcement taxpayer rights in India. It was first introduced by the Finance Minister, Smt. Nirmala Sitharaman, in her budget speech of FY 2020-21.

It is also mentioned in the Finance Act, 2020. A new provision, Section 119A, has been introduced in India's Income Tax Act. As per this new provision, the Central Board of Direct Taxes is required to "adopt" and "declare" the charter.

The taxpayer charter and other reforms (such as the introduction of computerised, "faceless" assessments) are aimed at generating trust among taxpayers. But policy statements such as a taxpayer charter does not introduce new legal obligations or rights that taxpayers can claim against tax authorities. Such a charter may not resolve the issue of excessive litigation in tax matters. Nor would it clarify the consequences if a tax department prefers unnecessary litigation against, or serves harsh demand/penalty notices, on taxpayers.

A policy statement does not introduce a substantive amendment to tax law. A legitimate response to the taxpayer's distrust of India's tax enforcement system would be a critical analysis of administrative practices and inefficiencies in the law itself.

In a country so heavily reliant on revenue from indirect taxes (such as the goods and services tax), an urgent area of reform is enforcing a transparent and progressive tax system. This editorial published by the Economic Times succinctly describes the areas of tax reform that have not been clearly addressed by recent government announcements.