A

PROJECT REPORT
ON
“Analysis on RegTech Sector”
AT
KRG Strategy Consultants Private Limited.
Mumbai

SUBMITTED BY
Group- Green

Under Guidance Of
CMA Kailash R. Gandhi
Project Head
 Index

Content Page Number

Introduction 1
Methodology 4
Results 5
Limitations 17
Conclusion and Recommendations 18
References 19
 Introduction

Background:
The income tax department is one of the crucial departments of the Ministry of Finance,
Government of India. The income tax department came into existence in 1860. The First act
was followed only for five years and, the second act was enforced in 1865. The second act
had major changes when compared to the first act. With this new act, the income tax
department started working with a new concept of agriculture income. However, the original
act of income tax came into existence in 1922 with the implementation of the income tax act
1922. This new act showed the major changes from the last act by charging in the year of
assessment on the income earned of last year. In 1956, the Government modified this act with
few amendments keeping the original act in its format. A committee was formed by the
Government to review the new act. The committee made few modifications and submitted the
final Income Tax bill in Lok Sabha in 1961. The president signed this bill on 13th September
1961. The Government has been using this act since 1961 for running the Indian Taxation
system throughout the country. The Income Tax Department has identified few important
facts that tax payment decreased due to tax saving investment increased along with the
income, and employees preferred to invest in life insurance corporation, provident fund and
national saving certificate.

Why there was an evolution of the E-filing of returns system existed? This was an era; people
prefer to use exclusive technology in all possible ways to get things done easily. In view of
the people use of technology, the Government of India made some possible facts towards
electronic filing, that the taxpayers can submit their tax returns online with the help of the E-
portal by accessing their website, i.e., http://incometaxindiaefiling.gov.in/. The Electronic
filing comes with many benefits like Income Tax Payer can file their online return anytime,
anywhere, at their leisure. Certainty of delivery and quick confirmation provides the assessee
with immediate confirmation from tax administration that returns have been received. A
taxpayer receiving refunds to get them sooner, privacy and security are assured by the
Government of India. Different drawback related to the chance of data entry errors; however
in online, the transaction can be done electronically with a click of a button. The portal has
accessibility which allows the user to log in 24*7*365. The data handling and storing of
documents are easy electronically. Paper returns take more than four to six weeks to process,
but with the electronic filing of returns, it can be filed fastly and helps to proceed quickly,
even the due date to file is over. By the filing of returns electronically and you choose direct
deposit of your refund, the fund will transfer directly to the bank account within few days. It
is free for the income taxpayers who are willing to file the returns electronically. Filing
returns online is a secured process that is using a private network designed to meet the
highest security standards by providing privacy to the user.
E-filing is the process of submitting tax returns over the internet, using tax preparation
software that has been pre-approved by relevant tax authority that means the income tax
imposed on the individual or entities (taxpayers) that depends on the income or profit (taxable
income) of the taxpayers.

Surprisingly, literature on E-filing in India is scanty. With the above observations, the present
study is focused on finding the income taxpayers perception towards electronic filing among
individual business firms, NRI's. This Study focuses on awareness among the respondents on
various Income Tax exemptions available and have they used those exemptions anytime.
With the growing RegTech industry, which provides tax solutions to either Business client or
Individual client. This study also focuses on the need for personal Tax assistant consulting
firms available online and the perception of users towards such services. The Study is being
conducted with the collected primary data. Observations are observed from the questionnaire
to find out the income taxpayers perception, satisfaction and awareness of electronic filing.

Literature Review:

The Project focuses on understanding the need and importance of RegTech in the industry for
Individual taxpayers. The focus would be on understanding the gaps between the existing
software and the requirements of individual taxpayers and then improving the solutions
available to them. The task of Tax planning and the filling becomes easy for people. We
attended a webinar on Fintech and RegTech and learned in great detail about RegTech and its
importance in the industry. We learned that awareness about that is less among the individual
taxpayers, due to which they face a lot of difficulty in their tax planning and filing. By doing
an assignment on the CA Automation companies, we came across a lot of companies that
provide the kind of automation services for firms like Client Management, Compliance
management, Task management, Document Management, Compliance reminders, and other
such services using various tools like dashboards, analytics, report generation, etc., this
helped us know the existing services the software provides to its customers and by the further
assignments, i.e., making the survey questionnaire and analysis of the same we would get to
know the requirements of the individual taxpayers and this will help us in understanding the
awareness of RegTech among people and also help in finding the gaps and working on that.
This will also help us know the impact of the introduction of RegTech on them.

Wang, based on his study, discussed the adoption of electronic tax filing systems. This paper
discusses the factors affecting the adoption of electronic tax-filing systems. Using the new
technology acceptance model (TAM) as a theoretical framework, the study introduced
"perceived credibility" as a new factor reflecting the user's intrinsic belief in the electronic
tax-filing systems. The study's findings provided important implications for developing
effective electronic government services in general and effective electronic tax-filing systems
in particular.
In their research on E-Filing of Income Tax returns, Geetha R and Sekar M found that new
technologies are introduced in the present world day by day and improved very fast in all
fields. Now new technology gifted to taxpayers for filing their income tax returns online is e-
filing. The e-filing is the new effective method of filing income tax return online and make e-
payment tax. It saves our golden time, energy and cost and also reduces our tension. So the
taxpayers are requested to use e-filing and e-payment facilities. This study reveals that the
existing users are satisfied with the e-filing facilities. Still, most of the individual taxpayers
are not aware of the e-filing and e-payment procedures, so sufficient measures are required to
create more awareness in taxpayers' minds regarding the e-filing of income tax.
Gayathri et al. explained the taxpayer's perception towards the e-filing of income tax returns.
To measure the level of awareness and satisfaction of the respondents towards e-filing,
primary data was collected with the help of questionnaires. The study concludes the
respondents did e-filing due to faster tax refund, 4 per cent of respondents did e-filing for a
special cash rebate, and only 7 per cent of respondents had said that they had no motivation
for e-filing, rather the reason was forced mental pressure.
Kumar et al. discussed the benefits of electronic filing of tax to the authorities, policymakers,
present and prospective taxpayers, e-filing intermediaries, financial software engineers and
academicians. The paper focused on the benefits derived by the different sections of society
due to the e-filing of income tax returns.

Objectives of The Study:

Following objectives are planned in the present study

1. To understand the perception of income taxpayers towards E-filing.

2. To understand whether the respondent would file Nil Returns.
3. To know about the satisfaction level and risk of the income taxpayers toward
electronic filing.
4. To understand the awareness level of the taxpayer on various deductions available
under u/s 80C
5. To understand the benefits taxpayers are getting for filing the returns.
6. To understand the services that taxpayers are expecting from Tax Professionals/
Consultants
7. To analyze the satisfaction level for the services you hired or would hire in future
from a Consultant/Professional.
 Methodology
Methods of collecting data:
The method of collecting data for the secondary research of literature review was through
online sources like articles, research papers, and specific sites to get the details of various
Income Tax Acts and Taxpayers behaviour in the current scenario. Later, we have used the
QuizPro Survey tool to collect primary data from the respondents, and we have a sample of
2344 respondents who belong to diverse categories. We have used the online mode of
collecting data, keeping in mind the Current Covid 19 situation.

Survey conduct method:

To conduct the survey, we decided to target various categories of respondents like Business
people, Working Professionals, Students, and other types to segregate based on the classes.
We have then following that, and we decided to conduct an online survey keeping the Covid-
19 pandemic in mind. We designed our questionnaire consisting of 25 questions with various
kinds of nominal, ordinal, numerical, categorical, and ratios. We have collected responses
from 2344 respondents and analyzed them based on multiple aspects and categories
mentioned in the form.

Research Instrument for the Study:

To measure the responses from the respondents, a structured questionnaire is used. The data
collected from the respondents through the survey is recorded in Excel and processed.
Analysis of the collected data and Visualization Charts are prepared using MS-Excel
 Results
Age

It can be observed that 50% of the respondents fall into the 18-24 age group.
It can further be noticed that 31%, 8%, 9% and 2% of the respondents belong in the age
groups 25-34, 35-44, 45-60 and above 60, respectively.

Occupation

About 43% of the respondents are students without income, 33% belong to the service sector
(Government or private employment), 8% derive their income from jobs requiring specialized
skills, 13% are businessmen, traders or shopkeepers, and 3% belong to the other category.
Residential Status

As can be observed, the residential status is Indian Resident for 97% of respondents, whereas
it is Non-Indian Resident (NRI) for 3% of respondents.

How ITR filing is done

52.87% of respondents do their ITR filing with the help of professionals like CA, CS,
CMA/Advocates etc. 17.55% of respondents do it with the help of online tax filing websites.
29.58% of respondents do it on their own through Government's income tax website.
This result shows that respondents are still using the traditional way of filing the returns with
the help of Professionals, and there is still scope for a shift towards the Online Tax Filing
websites
Filing NIL Returns

What's a nil return?

Nil income tax return is filed to the Income Tax Department that one fall below the taxable
income and therefore need not pay taxes during the year.
When should one file a nil return?

 To have an income tax return as proof of income

 To claim a refund

44% of people responded to filing the NIL returns from 2020-21, whereas 56% said no to
filing NIL returns.
More than half of the respondents are not interested in filing Nil Returns which can provide
them many benefits, but due to lack of either awareness or the misconception that it is not
necessary many are not interested in filing it.

Deduction u/s Section 80C

To encourage investments and savings amongst the taxpayers, the income tax department has
provided different deductions from taxable income under chapter VI A deductions. The 80C
deductions being the most famous, other deductions are beneficial for the taxpayers to reduce
their tax liability.
Section 80C – Deductions on Investments
Section 80C is one of the most favourite and popular sections amongst the taxpayers. It
allows reducing taxable income by making tax-saving investments or incurring eligible
expenses under it. This allows a maximum deduction of Rs 1.5 lakh under this section every
year from taxpayers' total income.
Only Individuals and HUFs can avail of the benefits under this Deduction. But Companies,
LLPs, partnership firms cannot avail of this benefit as a Deduction.
Section 80C includes other subsections , 80CCC, 80CCD (1) , 80CCD (1b) and 80CCD (2).

It is important to know that the overall limit under this section, including the claims
under subsections, is Rs 1.5 lakh except for an additional deduction of Rs 50,000
allowed u/s 80CCD(1b).
Section 80CCC – The Insurance Premium /Section 80CCD – Pension Contribution

Eligible investments for tax

deductions

80 C 80C allows the Deduction for

the investment made in PPF,
LIC premium, EPF, principal
amount payment towards home
loan, Equity-linked saving
scheme, stamp duty and
registration charges for the
purchase of property, Sukanya
Samriddhi Yojana (SSY),
National saving certificate
(NSC), Senior citizen savings
scheme (SCSS), ULIP, tax
saving FD for five years,
Infrastructure bonds etc

80CCC 80CCC section allows

Deduction deduction annuity pension
for the life plans payments. Pension
insurance received from the annuity plan
annuity or amount received upon
plan. surrender of the annuity plan,
including bonus accrued or
interest on the annuity, is
taxable in the year of receipt
received.
80CCD (1) The Employee's
Deduction contribution under section
for the NPS 80CCD (1) Maximum
Deduction under this section
allowed is least of following.
 10% of salary (if the
taxpayer is an
employee)

 20% of total gross

income (in case of self-
employed)

 Rs 1.5 Lakh (max limit

allowed for u/s 80C)

80CCD The Additional Deduction of

(1b) Rs 50,000 is allowed for the
Deduction amount deposited to the NPS
for the NPS account of the taxpayer.
Contributions to Atal
Pension Yojana (APY) is also
eligible for Deduction.

80CCD (2) Employers contribution is

Deduction allowed for Deduction up to
for NPS 10% of basic salary plus
dearness allowance (DA) under
this section. The benefit in this
section is allowed only to
salaried individuals and not
self-employed.

54% of the respondents feel that the maximum amount of tax deduction u/s 80C is ₹ 1,50,000
and 18% of the respondents feel that it is ₹ 1,00,000. The rest, 17% and 11% of the
respondents think that the maximum Deduction amount is ₹80,000 and ₹ 1,20,000,
respectively.
It has been inferred that more than 50% of the respondents are aware of the correct Maximum
amount of tax deductions u/s 80C, which might make the taxpayers utilize it to the full extent,
thus approaching a tax consultant for further help is not required regarding the 80C section.
Tax Consultancy Services

Tax consultants help their clients to save money by making wise financial decisions about
tax-related issues. They gather information from the client about their financial situations and
devise strategies to reduce their tax liability by taking advantage of deductions and tax credit.
Tax consultants ensure their clients fulfil their tax obligations and follow the law.
It can be inferred that most people prefer to hire a tax consultant for the services of tax
planning and investment management. The least number of people prefer to hire a tax
consultant for rendering services related to notifying about important dates and notices.

Consulting expert for capital gain services

Most people prefer to consult an expert for capital gain tax calculation. The least preferred
service for which respondents hire an expert is to respond to the income tax notice. Some
people have responded to not requiring an expert altogether.
Minimum Duration to hold various securities for capital gain/loss

The minimum Duration that a person is required to hold equity shares for considering as long
term capital gain/loss is 12 months. The maximum number of people have responded to it
being more than one year, and the least number of people have responded to it being more
than three years.
Most respondents, i.e., 57%, are aware of the minimum duration they need to hold Equity
shares to consider it as long term Capital Gain.

The minimum Duration that a person is required to hold the movable property for considering
as long term capital gain/loss is 36 months. The most number of people have responded to it
being more than one year, and the least number of people have responded to it being more
than two years.
Most respondents are not aware of the minimum duration they need to hold Movable property
like Gold to consider it as long term Capital Gain. This shows most of the respondents never
hold this type of asset or heard of it.
The minimum Duration that a person is required to hold the immovable property for
considering as long term capital gain/loss is 24 months. Maximum people have responded to
it being more than three years, and the least number of people have responded to it being
more than two years.

The minimum Duration that a person is required to hold debt mutual funds for considering as
long term capital gain/loss is 36 months. The most number of people have responded to it
being more than one year, and the least number of people have responded to it being more
than two years.

The minimum Duration that a person is required to hold equity mutual funds for considering
as long term capital gain/loss is 12 months. The most number of people have responded to it
being more than one year, and the least number of people have responded to it being more
than three years.

Paying tax on selling a capital asset

The profit or gain that arise from the sale of any 'capital asset' is called capital gain. This gain
or profit comes under the category 'income', and hence one needs to pay tax for that amount
in the year in which the transfer of the capital asset takes place.
About 71.41% of people have responded yes to paying tax on selling of any capital asset, and
the rest 28.59% people have responded no.

Benefits of filing income tax return

All of the above: 1523 people have responded to the option 'All of the above'.
Claim Tax Refund: 443 people have responded to claiming tax refund to benefit from filing
the income tax return.
Easy Loan Approval: 407 people have responded to easy loan approval to benefit from filing
the income tax return.
Avoid penalties and prosecution: 344 people have responded to avoiding penalties and
prosecution to benefit from filing the income tax return.
Income and address proof: 282 people have responded to income and address proof to benefit
from filing the income tax return.
To improve CIBIL score: 266 people have responded to improving CIBIL score to benefit
from filing the income tax return.
Quick visa processing: 182 people have responded to quick visa processing to benefit from
filing the income tax return.
Carry forward of losses: 166 people have responded to carrying forward of losses to benefit
from filing the income tax return.
More than 60% of respondents are aware of the benefits they get by filing income tax returns.
This shows that either they have utilized the benefits or learnt about the benefits

Investments and Expenditures that are allowed as Tax Deductions u/s 80C

Tuition Fees of Kids: 178, i.e. 7.59% of people have responded to knowing about the
expenses made towards tuition fees of kids as tax-deductible u/s 80C.
5-year Bank Deposits (FDs): 383, i.e. 16.33% of people have responded to knowing about the
investment made in 5-year bank deposits as tax-deductible.
Financial Instruments like ULIP, ELSS, NPS: 397, i.e. 16.93% of people have responded to
knowing about the investment made in schemes like ULIP, ELSS, NPS to be tax-deductible.
National Saving Certificate (NSC): 433, i.e. 18.47% of people have responded to knowing
about the investment made in the NSC scheme to be tax-deductible.
Life Insurance Premium: 534, i.e. 22.78% of people have responded to know about the
premium paid towards life insurance to be tax-deductible.
Principal Repayment made towards home loan: 254, i.e. 10.83% of people have responded to
knowing about the principal Repayment towards the home loan to be tax-deductible.
Public Provident Fund: 722, i.e. 30.80% of people have responded to knowing about the
investment made in PPF to be tax-deductible.
All of the above: 1196, i.e. 51.02% of people have responded to knowing that the investment
and expenses made towards the above purposes/instruments are tax-deductible.

Basic Exemption Limit for filing ITR for various age groups
Age of an individual Basic Exemption Limit(₹)
Below 60 years of age 2,50,000
Between 60 and 80 years of age 3,00,000
80 years and above 5,00,000

In the respondents of age group below 60 years, the maximum percentage of people, i.e.
48.46%, have responded to people's minimum income who need to file an ITR to be ₹
2,50,000.

In the age group 60-80, the maximum percentage of people, i.e. 48.16%, has responded to
people's minimum income to file an ITR to be ₹ 3,00,000.
In the age group of above 80 years of age, the maximum percentage of people, i.e. 55.30%,
have responded to people's minimum income who need to file an ITR to be ₹ 5,00,000.
This shows that less than 50% of respondents are aware of the Income Tax Basic Exemption
limit based on age group. There is a need to create a campaign to create awareness about the
Basic Exemption limit based on age group.

Service Rating for Professional / Consultant Services:

Service Rating for the services provided by a Consultant/Professional, on a scale of 1-5 (1-
being lowest and 5-being Highest)

For the factor, Ethics more than 66% of respondents rated it above average, and they are
satisfied with that factor.
For the factor, Speed of Service, more than 62% of respondents rated it above average, and
they are satisfied with that factor.
For the factor, Tax Savings, more than 61% of respondents rated it above average, and they
are satisfied with that factor.
For the factor, Service Charge, more than 51% of respondents rated it below average, and
they are not satisfied with that factor.
For the factor, Trust more than 66% of respondents rated it above average, and they are
satisfied with that factor.
Most of the respondents rated above average for the factors like Ethics, Speed of Service and
Trust.
But for the factor service charge, respondents rated it below the average. This shows that
respondents are not satisfied with the cost they incur while consulting Tax
Professional/Consultant for their work. This indicates that Professionals need to reconsider
their fees they are charging for their services.

Limitations

There exist various limitations in this research which are as follows:

1. Since the responses collected were dependent on primary data (questionnaires), the
research consequently resorted to convenient sampling. This led to a lack of variation
in the data and a constrained reach in getting respondents from a more extensive set of
eligible respondents.
2. Some respondents withdrew from providing their opinions in the open-ended questions
of the questionnaire. There were some responses which were which seemed to be near
the average score of the scale. Thus, there were predominantly two types of respondent
errors that were identified, reducing the eligible responses.
3. There was a difference in understanding of the question that was provided. The
intention behind the question and the understanding of the question by the respondent
was not in sync in some of the instances.
4. The Report describes the relations between various variables but does not clearly state
the reasons for the same.
 Conclusion
The regulatory framework for financial services is in need of rethinking. The RegTech 3.0 is
our term for the future of RegTech industry. The FinTech industry is shifting its focus of
interest from the digitization of money to the monetization of data, thus making it necessary
for new frameworks to accommodate new concepts, such as algorithm supervision and data
sovereignty. A sequential approach to the development of FinTech within a RegTech
framework is necessary.
The maximum number of respondents belong to the age group 18-24 and are students without
income. The second highest percentage is for the number of people who belong to the age
group 24-35. About 33% of the respondents are employed in the services sector. 97% of
respondents are Indians.
It can be observed that most people still rely on professionals like CA, CS, Advocates, CMA
etc., for their ITR filing. Some of the reasons for the same can be increased trust in
professionals, their knowledge and expertise. However, almost 18% of individuals rely on
online tax filing websites too to file their ITR. Some websites are truly trustworthy and
display good ethics, which can be reflected in people's responses.
It can be concluded from people's responses that 44% of the people fall below the taxable
income. Most respondents are aware and educated of the maximum amount of tax deduction
that can be availed u/s 80C and about the basic exemption limit for various age groups when
filing ITR. Most respondents are in need to consult experts to take help in calculating their
capital gains tax and also to claim maximum tax deductions. However, when we analyze the
data for the minimum duration an individual needs to hold different types of assets to
consider it as a long term capital gain/loss arising out of transfer, we can say that people are
not aware of the same and do not have a correct understanding. Most people are aware of the
tax that needs to be paid on a capital gain. Most people are also aware of the benefits of filing
ITR and the investments and expenditures which are allowed as tax deduction u/s 80C.

Recommendations
As per the finding of the study, here are some of the recommendations:

 According to this survey, the website of E-Filing need to be more eco-friendly. When the
taxpayers operate the website, the websites give the steps for filing the returns; if these
changes develop, the income taxpayers do not depend on others for electronic filing.
 The Government also focuses on the income taxpayers expectations of what problems
occur for filing the returns online that will help the income tax payers filing the income
tax returns.
 The Tax professionals/ Consultants need to reduce the charges for their services to
accommodate more taxpayers to get their services.
 Many taxpayers are not interested in filing Nil Returns, and Government should take the
initiative and educate people on the advantages of filing Nil Returns every year.
 Many taxpayers had the least knowledge about Capital Gains which need to be
campaigned and educated among the taxpayers.
References
Gayathri P, J. K. (2016). A Study on Tax Payer’s Perception Towards E-Filing of Income Tax Returns. .
International Journal of Trend in Research and Development, 32-38.

Geetha R, S. M. (2012). E-Filing of Income Tax: Awareness and Satisfaction level of individual tax
payer. Research Journal of Management Science , 1: 6-11.

Income Tax Department, Government of India. (n.d.). DEDUCTION UNDER SECTION 80C. Retrieved
from Income Tax Department, Government of India:
https://www.incometaxindia.gov.in/Pages/tools/deduction-under-section-80c.aspx

Kumar M, A. M. (2014). E-Filing: Creating New Revolution in Taxation of India. . Global Journal of
Finance and Management, 6: 379-384.

SY, W. (2002). The adoption of electronic tax filing systems: An empirical study. . Journal of
Government Information Quarterly, 20: 333-352.