With the clock ticking on filing income tax returns (deadline: July 31) for individuals, most of us would be scrambling through the financial activities through the year. While we do so, it is important to understand the relevant provisions, forms and procedure of filing the tax returns.
An individual who has taxable income in the financial year 2010-11, that is, assessment year 2011-12, under the Income Tax Act, 1961, is obliged to file a tax return. For those who do not have any net tax payable while furnishing the return, one can file the return at any time before the expiry of one year from the end of the relevant assessment year without any penalty. If it is filed after the end of the assessment year, there is a lump-sum penalty of R5,000. On the other hand, if you have to pay any balance tax and do not do it before July 31, there you have to pay a penalty of 1% per month on the net tax payable.
Exemption to salaried class
A welcome step introduced for this financial year is exemption to a class of salaried individuals from filing the tax return subject to certain conditions. This exemption would apply to an individual whose total income (comprising of only salary income and bank interest on fixed deposits not exceeding R10,000) in the financial year does not exceed R5 lakh.
Further, the individual should have reported the interest income to his employer who should have deducted the tax at source on the entire income. Other conditions such as salary from only one employer in the financial year, no refund claim and no pending notice also apply. This notification may be a little late in the day as the deadline for deduction of taxes by the employer and issuing the Form 16 had already expired. It may therefore not be practically feasible for an employee to disclose his interest income and get the employer to deduct taxes thereon and report it appropriately in the Form 16.
Tax return filing due date
The prescribed due date for tax return filing for individuals for financial year 2010-11 is July 31. Only in cases where the accounts of the individual are required to be audited or in the case of a partner in a firm whose accounts are required to be audited, the due date is extended to September 30.
Tax return forms
A few new tax return forms have been notified by the tax authorities for financial year 2010-11, which have replaced the earlier forms in use. The type of form to be used would be based on the nature of income and the same are briefly discussed below:
ITR-1 Sahaj
Sahaj is the newly designed ITR-1 which replaces the Saral. This form applies to individuals having income from salary or pension or one house property (excluding loss brought forward from previous years) or other sources (except winnings from lottery or income from horse races). Where income of a minor is to be included, this form can be used only if the income falls into the above categories.
ITR-2
This form applies to those deriving income only from salary or pension or house property or capital gains or other sources and not having income from business or profession.
ITR-3
This form applies to individuals or a Hindu undivided family (HUFs) being partners in a partnership firm.
ITR-4S Sugam
This form applies to individuals or HUFs deriving income from business or profession which are taxed on presumptive basis.
ITR-4
This form applies to individuals or HUFs deriving income from a proprietary business or profession. If the taxpayer claims income to be lower than income derived under presumptive business, he has to get his accounts audited and file ITR-4 and not ITR-4S.
In all the current forms, the requirement of reporting transactions relating to investments ? Annual Information Return ? in property, shares, credit card payments, etc, has been done away with. However, individuals are required to provide their bank account details and MICR code in the tax return forms in all cases.
Process of filing the tax return
The return forms can be filed with the income tax department in any of the following ways:
By physical filing of the return in paper form to the tax office; By registering at the income tax website and e-filing of the return using digital signature;
By registering at the income tax website and e-filing the return without using digital signature. In this case, Form ITR-V is generated online which should be printed, signed (in blue ink) and posted to the Central Processing Centre (CPC), Bangalore, within 120 days of e-filing or July 31, whichever is later. The CPC confirms the receipt of the ITR-V by sending an e-receipt to the e-mail address mentioned at the time of online registration.
While paying your taxes correctly on time is imperative, the process is complete only with the use of the correct tax return form and follow the right filing process.
The writer is executive director (tax), KPMG