By Parizad Sirwalla
With already 3 months post the end of financial year (FY) 2016-17, it is imperative for individual taxpayers to assess their respective tax situation and initiate the process for filing their income-tax return in order avoid any last-minute difficulties.
Who should file a tax return
An individual is obligated to file an income-tax return if his gross taxable income [before exemption for long term gain on listed securities and other deductions under Chapter VI-A of the Income Tax Act, 1961 (the Act)] during the particular FY exceeds the maximum amount which is not chargeable to tax. For FY 2016-17, total income up to Rs 2.5 lakh is not subject to tax for a resident as well as non-resident individual. For resident senior citizens (i.e. more than 60 years of age), such threshold of total income is Rs 3 lakh and for resident super senior citizens (i.e. more than 80 years of age) it is Rs 5 lakh. No different limits exist for female taxpayers. As a resident and ordinary resident individual you may also have a tax return filing obligation irrespective of your income, if you own overseas assets.
The deadline to file tax returns is 31 July 2017 for FY 2016-17 for individuals not required to have their books of account audited from a tax perspective.
Computation of income
Once the gross total income under different heads of income is determined, various deductions prescribed under (such as Section 80C in respect of specified investments/ expenditure, Section 80D for medical insurance premium, Section 80G for eligible donations, etc.) can be claimed to arrive at total taxable income. On such taxable income, applicable slab rates of tax should be applied to compute the total tax liability. Any taxes due on the tax return after claiming credit of prepaid taxes (taxes deducted at source and advance taxes paid during the year) should be paid before filing the tax return.
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Income-tax return forms
The tax return forms were notified for FY 2016-17 applicable to individuals are:
ITR-1: For individuals earning a salary, pension, or income from one house property or sources other than lottery with no losses to be carried forward and no foreign tax relief to be claimed. This form will not be applicable if the total income of the individual is above Rs 50 lakh;
ITR-2: For those not having income from business or profession under any proprietary firms
ITR 3: For professionals and business owners; individuals involved in speculative business.
ITR-4: For taxpayers having income assessed on presumptive basis.
How to file a tax return
Individuals having a total income less than Rs 5 lakh have an option for filing their tax return in a physical form instead of electronic filing. However, all other taxpayers including those who wish to claim a refund of taxes have to mandatorily file their return electronically.
Before filing the tax return, individuals having both PAN and an Aadhaar number should link the two by 1st July 2017 as per newly-inserted requirement by Finance Act 2017 (except for foreign citizens, individuals above 80 years of age, non-residents and individuals staying in certain specified states). Aadhaar number should also be mandatorily quoted on the tax return.
Broadly speaking, the process for filing the tax return electronically is as under:
1. Taxpayer should register and login into the income-tax e-filing portal using personal credentials such as PAN, password and date of birth;
2. Retrieve and verify online tax credit statement (Form 26AS) in support of taxes deducted at source by the employer/ any other deductor and advance taxes paid during the year;
3. Prepare a computation of income and taxes. If any additional taxes are due, pay the same before filing the same alongwith applicable interest;
4. Download and fill in the appropriate excel utility of the applicable income tax return form. While filling the excel utility, taxpayer should also adhere with the prescribed disclosure requirements (like schedule AL for details of assets and liabilities held in India if total income exceeds Rs 50 lakh, schedule FA for foreign bank accounts and assets details, cash deposit in excess of Rs 2 lakh during the demonetization period etc.);
5. After filling the excel utility, generate xml file and upload the same on e-filing portal;
6. Post uploading the xml file, an acknowledgement of the tax return filed (Form ITR-V) would be generated. Form ITR-V can be validated either online (through Aadhaar, digital signature or other modes) or through physical signatures to complete the filing process.
7. For individuals claiming credit of overseas taxes there is a requirement to complete and file Form 67. However, administrative guidelines on manner and timing of filing the same are awaited from the tax department.
While the online filing system does not allow uploading of any documents, it may be advisable to retain all relevant documents in support of income disclosed, claims of exemption/ deduction made etc. This could help if your return is selected by the tax department for a scrutiny.
(The author is Partner and Head, Global Mobility Services, Tax, KPMG in India)