Income Tax Department: Key Functions, Services, Role and Responsibilities of ITD

In India, all activities regarding levying and collection of income tax are handled by the Income Tax Department. It is a part of the Indian Government and helps the authorities collect revenue from its citizens. This helps the latter perform its administrative activities, conduct developmental projects and keep the nation moving on the road of progress. 

So, if you want a comprehensive idea of how the Income Tax Department works, read on.   

ITD Full Form

The term ITD stands for Income Tax Department. It is a crucial part of the Indian Government which is responsible for the collection of income tax and enforcing tax laws.    

History of Income Tax Department in India

The Income Tax Department was established after the Income Tax Act of 1922, which contained provisions for establishing a proper administrative system to handle income tax collection in India. 

In 1924, the Central Board of Revenue Act was passed by the government. It led to the formation of a board which would serve as a statutory body for catering to the administrative responsibilities of the IT Act. 

For each province, the authorities appointed Commissioners of Income Tax, along with Assistant Commissioners and Income Tax Officers to serve under them. After the IT Act amendments in 1939, there were two major structural changes, which are:

• Appellate functions and administrative functions were separated. Additionally, Appellate Assistant Commissioners were appointed to handle the new responsibilities.
• The Directorate of Inspection (Income Tax) was established in Bombay in 1940. This body was to serve as a central charge to facilitate effective control of the ITD over the entire country. In 1941, the Appellate Tribunal came into being, and a similar central charge was established in Calcutta. 

Fast-forward a few years to 1981, the Income Tax Department got computerised and set up the Directorate of Income Tax (Systems). Then, in 1985, it introduced the Post of Director General (Investigation) to create an effective check on tax evasion. 

After that, in 2002, computerised returns processing was introduced all over India. In 2007, the All India Tax Network (TAXNET) was set up and it established a connection between 700+ offices across 500+ cities. 36 Regional Computer Centres (RCCs) were consolidated into a single centralised database and the authorities launched an Integrated Taxpayer Data Management System (ITDMS) to draw a 360° taxpayer profile.  

Then, in 2009, a Centralized Processing Centre was established in Bangalore to handle bulk paper and e-filed return processing. Hereafter, in 2021, the ITD launched its income tax e-filing portal, making the process of filing returns completely digital.      

Role and Responsibilities of ITD in the Indian Tax System

Here are some of the main roles and responsibilities of the Income Tax Department:

• Matters relating to the levying and collection of Direct Taxes.
• Enforcing Double Taxation Avoidance Agreements (DTAA) and other economic laws, such as the Black Money Act of 2015 and the Benami Transactions (Prohibition) Act of 1988. 
• Processing income tax rebates.  
• Imposing fines for late filings. 
• Prosecuting assessees in case of tax evasion. 

Roles of ITD

The Income Tax Department (ITD) fulfils several vital roles within India's fiscal system:

• Regulatory Role: The ITD regulates direct tax laws, ensuring that individuals and entities comply with the Income Tax Act.
• Advisory Role: It advises the government on matters related to direct taxation and its impact on the economy.
• Educational Role: The department also works to educate taxpayers about their rights and responsibilities

Hierarchical Structure of ITD

Here is the hierarchical structure of the Income Tax Department for the Indian Revenue Service:

• Principal Chief Commissioner of Income Tax
• Chief Commissioner of Income Tax
• Principal Commissioner of Income Tax
• Commissioner of Income Tax
• Additional Commissioner of Income Tax
• Joint Commissioner of Income Tax
• Deputy Commissioner of Income Tax
• Assistant Commissioner of Income Tax

Now, mentioned below is the hierarchy in the ITD other than the Indian Revenue Service:

• Income Tax Officer (Administrative Officer - II, Sr. Private Secretary) – Level 9
• Income Tax Officer (Administrative Officer - II, Sr. Private Secretary) – Level 8
• Administrative Officer - III (Private Secretary, Inspector of Income Tax)
• Office Superintendent, Stenographer-Gr. I, Sr. Tax Assistant, (Executive Assistants) Staff Car Driver Spl. Gr.
• Staff Car Driver Gr. I
• Tax Assistant, Steno Gr. II, Staff Car Driver Gr. II
• Notice Server, Staff Car Driver Gr. III
• LDC
• MTS

Who is the Head of the Income Tax Department?

The Income Tax Department is headed by the Central Board of Direct Taxes (CBDT). 

Income Tax Department Services

The Income Tax Department offers a wide range of services to taxpayers. Here they are:

Return Filing

• Taxpayer registration on the e-filing website
• Income tax return filing
• Filing AIR returns
• Viewing e-filed forms/returns
• Checking the status of outstanding tax demand 
• Submitting responses to outstanding tax demands
• Steps of submitting a rectification request
• Checking the status of income tax refund
• Steps to apply for a refund re-issue 
• Download intimation 143(1)
• Registering as a legal heir
• Providing responses in case of defective notices
• Compliance module

Tax Payments

• Inquiry on challan status
• Online tax payments
• Verification of TDS certificate
• Viewing the status of the TDS statement’s e-filing by the assessee’s deductor    
• Viewing tax credit statements via the e-filing website
• Viewing the assessee’s tax credit through the following:
• TRACES
• Internet banking   

TDS Related

• Online TAN applications
• TAN status
• Know your TAN
• Online Registration of TAN
• Updating TAN data
• Online TDS return filing
• TDS/TCS Correction Statement
• TDS/TCS - Default Status
• AIN allotment application forms
• File Validation Utility (FVU)
• Form 24G Preparation
• Form 24G status
• Online TDS statement corrections
• Online TDS challan replacements
• Viewing the assessee’s default summary
• Consolidated demand
• Statement and challan status
• Online verification of PAN
• Form 16A Download (by deductor)
• Locating Tax Information Network-Facilitation Centres
• Downloading the following:
• Form 27D
• Forms 16B
• Transaction report for non-residents
• Justification report
• Consolidated statement file
• Aggregate TDS compliance report
• TAN-PAN consolidated file
• E -tutorials and FAQs
• View annual Information System (AIS) and Taxpayer Information System(TIS)

PAN

• Online PAN application
• PAN status
• Aadhaar linking
• Know Your PAN
• Instant e-PAN

What is the Relation Between CBDT and the Income Tax (IT) Department?

The Central Board of Direct Taxation (CBDT) is a statutory government authority that functions under the rules laid down by the Central Board of Revenue Act of 1963. Primarily the CBDT is responsible for laying down all the rules and methods related to implementation of direct tax policies in India. It is the body that issues orders, circulars and notifications for the implementation of various taxes and tax-related rules/regulations. As income tax is a type of direct tax and the Income Tax Department monitors income tax collection by implementing taxes, the IT department operates according to the guidelines laid down by CBDT through its periodic notices and circulars.

Key Websites Managed and Operated by the IT Department 

The Income Tax Department of India was one of the first government units to fully adopt Internet technology and offer a wide range of online e-services. The following is a short list of the key websites managed and operated by the Income Tax Department of India:

• Official IT Department Website
• Income Tax e-Filing Website
• TDS Reconciliation Analysis and Correction Enabling System (TRACES) Website
• Central Board of Direct Taxes Website

Challenges Faced by ITD in Tax Administration

There are several challenges which the Income Tax Department faces that make tax collection a difficult task. Some of them are as follows:

• Assessees hiding cash transactions to avoid showing their income to the tax authorities. 
• Providing incorrect information while filing tax returns. 
• Storing cash in offshore bank accounts to avoid paying tax. 
• Bribing tax officials to reduce their tax liabilities.
• Companies enter false financial statements in their balance sheets to show a reduced annual income. 
• Smuggling items to avoid paying customs duties, state taxes and import-export taxes.      

Income Tax Department Official Website

To visit the official Income Tax Department website, click here. 

Income Tax Department Official Email ID

The official email ID for the ITD is @incometax.gov.in. 

Income Tax Department Official Twitter Account

Go to the Income Tax Department’s official Twitter account by clicking here.  

Income Tax Department Official Facebook Page

Visit the ITD's official Facebook page by clicking here. 

Income Tax Department Official YouTube Channel

You can visit the Income Tax Department’s official YouTube channel by clicking here.  

Abiding by all the rules set by the Income Tax Department is mandatory for all taxpayers. Moreover, assessees should declare their income earned within a financial year while filing their taxes and pay their tax liabilities within the due date. Failing to do so can lead to fines or imprisonment or both.