Madam Finance Minister : You Have Reduced the Burden but Not the Pain — A Citizen's Plea
by Hemendra K. Varma
Over the last three years, the ordinary citizen has received two significant financial concessions. The first is the sharp rise in the tax exemption limit for New Regime assessees to ₹12 lakh — though it remains unclear why a comparable, if smaller, relief was not extended to those still on the Old Regime. The second is the meaningful reduction in GST rates on a wide range of everyday items.
These measures have undeniably eased the financial burden on a large majority of citizens. For that, they deserve genuine credit.
But the pain remains — the pain of compliance. Above all, the relentless pain of filing returns.
This government proudly proclaims its commitment to MSMEs and their growth. Yet it seems strangely unaware of how heavily the compliance burden falls on exactly these enterprises — draining the very hours they should be spending on their real work: producing output for the nation and for export. Consider the returns an MSME owner/professional must file:
• TDS Return
• GST Return
• Income Tax Return
• Statutory Audit
Here is the heart of my plea: almost every one of these returns can be eliminated for a large number of taxpayers — not through any loss of information to the exchequer, but simply by capturing that information at the point of payment rather than through a separate return afterwards. Let me show you how, one return at a time.
1. The TDS Return
When TDS is deposited, the government is automatically informed of the deposit. So why demand a separate monthly TDS Return? For one reason only: at the moment of deposit, the system does not capture on whose behalf the tax was deducted. That single missing detail is the only genuinely useful thing the TDS Return adds.
The solution is simple. Require the deductor to record, at the time of depositing the TDS:
- the name and PAN of the deductee, and
- the bill number, date, and amount against which the deduction was made.
With that, the government receives — instantly, at source — everything it currently extracts from the monthly return. The TDS Return can then be abolished entirely.
This would free the deductor not only from filing every month, but from the penalties that follow even a small delay. A micro or small enterprise simply has no staff for this work, so it is outsourced to a consultant — who may or may not file on time, but whose lapses the deductor alone must pay for.
I speak from experience. My own CA once missed a TDS filing for over two months. The delay of 80 days, at ₹200 per day, cost me ₹16,000 in late fees — for a service I had already paid to have done correctly.
I urge the government to seriously consider capturing deductee details at the point of deposit, so that a separate TDS Return becomes wholly unnecessary.
2. The GST Return
The pattern repeats. GST is deposited every month against the bills raised that month — and then, every month, a return must be filed as well. (A quarterly option exists, yet most taxpayers still file monthly.)
Why file a return at all, when the tax has already been paid? Only to reconcile GST collected against GST deposited and input credit claimed. But that reconciliation, too, can be done at the point of deposit — simply by asking the depositor to declare the credit being set off that month.
In fact, the GST portal could go one step further and turn the deposit screen itself into the reconciliation by redesigning the GST Payment screen as under :
On clicking Pay/Submit, the portal's existing payment routine takes over, exactly as before. Adopt this, and the separate GST Return becomes redundant — and can be retired.
3. The Income Tax Return
Here the case for relief is strongest of all, because the numbers speak for themselves.
For AY 2024–25, the distribution of income tax filers helps illustrate the case for reform:
Source: taxguru.in — "Income Tax Return Filers in India: Key Data & Trends"
Against a total of roughly 7.28 crore filers for AY 2024–25, these 4.96 crore returns — a full 68% — came from people whose returned income was ₹5 lakh or below. Their average returned income was just ₹2.90 lakh.
Nearly two out of every three income tax returns in India are filed by people who owe little or nothing. My proposal is this:
Any person with a gross income of ₹7.5 lakh or less should be exempt from filing an Income Tax Return.
"But won't this invite tax evasion?" — Not at all.
The instinctive objection is that exempting returns opens the door to evasion. It does not — and here is why.
When you file your return today, does the Income Tax system simply accept your figures and compute tax accordingly? No.
Look at any intimation issued under Section 143(1) — whether it raises a demand or grants a refund and you will find two columns side by side :
"As provided by the taxpayer" and "As computed under Section 143(1)." See Screen Shot below.
By law, you must accept and pay as per the Department's computation unless you formally dispute it in appeal.
The implication is profound: even without a return, the government already knows what tax each PAN-holder owes. With nearly 95% of individuals inside the banking system, and the vast majority of transactions now electronic, traceable, and documented, that knowledge is more complete than ever.
So here is the mechanism:
· Taxpayers with gross income up to ₹7.5 lakh file no return at all.
· Instead, the Department issues them the same 143(1)-style intimation — computed from the data it already holds — showing either a refund due or a small amount payable.
The recipient then simply chooses to either:
- accept the refund or demand and settle it, OR
- contest the computation — in which case, and only then, they file a return showing how they arrive at a different figure.
Either way, the number of returns filed collapses. I estimate the fall would exceed 70%, with no meaningful risk to revenue.
What is actually at stake in revenue?
Consider the tax owed by someone at the very top of this bracket — a gross income of ₹7.5 lakh — under the Old Regime:
For salaried individuals the amounts are trivial; for non-salaried taxpayers they are modest — and their income, being non-salary, is typically interest and dividends (already subject to TDS) or business and professional gains (again subject to TDS). And note: this is the Old Regime. Under the New Regime, to which some 72% of taxpayers have already migrated — and especially after this Budget made income up to ₹12 lakh tax-free — the liability for this group is effectively nil.
Why "gross income," not "taxable income"
I deliberately propose a threshold on gross income — the sum of all income receipts — rather than on taxable income. Gross income is largely undisputable. Taxable income, by contrast, is arrived at after deductions that are open to interpretation and dispute.
The point matters. Full permissible deductions under the Old Regime (Sections 80C, 80D, 80DD, 80G, 80TTA and the like) approach ₹5 lakh, and more for salaried individuals. Even if a taxpayer claims only half of what is permitted:
- someone with ₹7.5 lakh gross income lands at a taxable income of about ₹5 lakh, and
- anyone below ₹7.5 lakh gross falls well under ₹5 lakh taxable.
And as the data above shows, taxpayers with returned (taxable) income below ₹5 lakh already make up a full 68% of all cases.
The benefits, in sum
Exempting those with gross annual income of ₹7.5 lakh or below from filing would:
- deliver enormous relief to a vast section of taxpayers, a great many of whom are MSME entrepreneurs and self-employed professionals;
- make filing dramatically faster and smoother for those above the threshold, ending the annual ritual of a portal that crawls, hangs, and forces deadline extensions;
- free the Department to focus its attention on higher-income assessees and close their assessments faster;
- cut administrative cost sharply — fewer returns to assess means faster refunds, less interest paid on delayed refunds, and no overtime rush at deadline season; and
- shrink tax disputes, simply because two-thirds fewer returns are filed.
A phased rollout
I strongly urge you to consider this reform for implementation in stages:
- Immediately: no IT Return for those with gross income of ₹7.5 lakh or below — announced explicitly as a two-year experiment. If revenue from this group does not fall by more than 2%, the system continues; if it does, the government reverts.
- FY 2028–29: if the experiment succeeds, raise the threshold to ₹9 lakh.
- Thereafter: make the exemption permanent and index the threshold periodically, so relief keeps pace with inflation.
If these three relaxations — in TDS, GST, and Income Tax Return filing — are implemented together, they would go a long way toward freeing MSMEs and self-employed professionals from a heavy burden of documentation, record-keeping, and compliance, along with the risk of inadvertent errors that can lead to fines and penalties.
Only then can the country truly benefit from the entrepreneurial energy currently spent meeting the bureaucratic and paperwork demands of government machinery — energy that could instead go into more productive and innovative work.
7 July 2026
