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  • Writer's pictureGalactic Advisors

Are we moving to a TurboTax situation in India?

A few weeks ago, Hasan Minhaj (Patriot Act) did an excellent video on Why doing taxes is so hard in the US.

This brought us to India. Keeping aside our reasoning on why tax filing websites may not be your best best, we do think India has to be wary of going down the same route.

ClearTax, Quicko and other websites allow free tax filing. Why though? Obviously, everyone is in the money making business and these websites are here to push their own services.

In the US, companies like TurboTax and H&R Block are part of the problem. They make money from the tax filing process being complicated, so they lobby against measures to simplify it. From 2011 to 2015, Intuit alone spent $13 million lobbying Congress. An industry group called the Free File Alliance, led by Intuit, spent millions to lobby for a ban on the IRS building its own tool for taxpayers to file for free online, which would have made tax filing so much easier. Basically: The IRS said “We’re going to try to make taxes easier,” and TurboTax said “The f**k you are.” -

India may end up going in the same direction if we allow companies to dictate and lobby the Government. In a country that is already grappling with low income reporting, last thing we need is to make Tax filing more complicated. Very few people in India file their income tax returns and only about 1.5 Cr people actually pay any tax.

CBDT already has MOUs in place with several agencies and have an unprecedented access to information. Recently, CBDT also signed an MOU with SEBI for exchange of information. What the Income Tax Department needs to do is develop systems to auto-populate information in tax returns - make Return filing easier! The final frontier obviously is Return-free filing - The Government fills your return and all you have to do is check this and pay tax. Lots of countries across the world are already doing this.

Now, what's the problem with Tax filing Websites?

In the US, tax preparation companies have been actively making it difficult for people to find their free filing option. Last Year, TurboTax and other companies used deceptive web design and misleading advertising to trick more than 14 million taxpayers, some lower income, into paying to file their taxes even though they were eligible to do it for free. They’ve even gone as far as to hide their free filing options from Google search results by editing the code in their website.
The tax prep industry has lobbied extensively to stop the IRS from creating a free file option - and they've gotten a lot of help from Republicans who have spent the last 30 years trying to cut the IRS budget. On top of that, they don’t have any money to advertise free filing programs because their budgets have been slashed completely. -

We might on the cusp of the same thing happening in India. ClearTax claims 2.5 million people use its services for filing tax returns. This number is only going to grow. Can we trust companies to continue to offer free services once they've captured a significant part of the market? Companies are here to make profits.

India needs to be wary of going down the same path as the US. ITR forms need to be simplified. We can't count the number of times we've had clients tell us they flat out don't understand the excel and java utility for filing Income Tax Returns. With this, all the Income Tax Department is doing is pushing people towards private companies.


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