Why Tax Departments depend on XML language to upload returns

We know the importance of “.XML” language to file income Tax / Service Tax return and therefore we must know some basic answers of certain questions related to “.XML” viz.

What is XML? How it works within the income and service Tax return? And Why did Government choose only .xml format for the automation process?

XML provides many benefits to Tax departments. The XML data can be stored, protected, queried, and analyzed within a database that is optimized for XML.


What is XML?

XML is a general purpose markup language designed especially for Web documents. It is a way of describing data and it allows designers to create their own customized tags enabling the transmission, validation and interpretation of data between applications and between organizations.



XML was created so that richly structured documents could be used over the Web. The alternative – HTML is not practical for this purpose. HTML comes bound with a set of semantics and does not provide arbitrary structure.
As tax complexity increases with each year. The government faces substantial administration and enforcement costs. Greater complexity, increased filings, and reduced budgets have traditionally strained the government’s ability to effectively administer the nation’s tax laws. The overall income Tax and Service Tax Assessment may frequently take months and even years to resolve, partly due to the voluminous documentation that needs to be analyzed.

XML usage in tax administration business process ranges from Tax return filing, to inter-governmental data exchanges, support for internal systems integration, and for analytical, reporting and publishing purposes.

XML’s biggest contribution is the ability to transmit, receive, and share information without data re-entry, enabling greater automation and less redundancy. Data coded, or tagged, with XML can be uploaded or downloaded into multiple applications by multiple users without manual intervention or translation. Tax return forms and related content typically change on an annual basis to reflect the changing tax policies and rules of evolving legislation. XML-based definitions of this kind of content provide the right balance of flexibility and meta-data integrity (through the use of schema).

But where are these returns and informational documents stores? How can they be effectively indexed and effectively indexed and managed in databases so as to maximize their value to the wide variety of tax administration business process that rely on them as a input. This is where XML database technology becomes a key enabler.


Exchange of Information between Government departments:

The government-to-government exchanges are increasingly taking the form of XML-based document exchanges, very similar to the return and informational data feeds received from the taxpayer population. In some cases this integration is further enhanced through Web Services transactions that send the XML documents in real-time.


XML is everywhere

Apart from Income Tax and Service Tax, XML is also being used at ROC-MCA21, SEBI and RBI to file Annual Accounts of companies or banking companies in XBRL format (XBRL is a member of XML family). Further AADHAR Card of UDI project is also used XML language for storing, capturing and analysis of data.

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