By Parizad Sirwalla

The due date for filing the annual individual income tax return (where tax audit is not required) for the tax year 2021-22 being July 31, 2022, is looming near. It is essential to know the important aspects related to individual tax return filing in India.

Though, there are many important aspects to keep in mind, in order to file an accurate income tax return in India, herein we shall look into a few pivotal aspects.

Tax filing requirement

Even in case where the taxable income in India is below the threshold limit or in case there is no income in India, an individual may still be mandatorily required to file his/her income tax return, if one or more of the following conditions is fulfilled:

  • Deposited amount or aggregate of amounts exceeding INR 1 crore in one or more current account during the previous year, or
  • Incurred expenditure of an amount or aggregate of amount exceeding INR 2 lakhs for travel to a foreign country for self or for any other person, or
  • Incurred expenditure of amount or aggregate of amount exceeding INR 1 lakh on consumption of electricity during the previous year
  • If total sales, turnover, gross receipts, as the case may be, in the business exceeds INR 60 lakh during a relevant tax year, or
  • If total gross receipts in a profession exceed INR 10 lakh during a relevant tax year or
  • If the aggregate of the tax deducted at source and tax collected at source during a tax year is INR 25,000 or more (for individual residents of more than 60 years of age – INR 50,000) or
  • The deposit in one or more savings bank account of an individual, in aggregate is INR 50 lakh or more during the tax year

It is worthwhile to note that income tax filing requirement in India shall also be triggered in case an individual holds foreign assets outside India, even where the taxable income in India is below the threshold limit or in case there is no income in India.

Important timelines

If an ITR is not filed by July 31, 2022, then the same shall be considered as a belated return and can be filed later, but not beyond December 31, 2022. Further, any return filed up to December 31, 2022, can be revised by December 31, 2022. However, in a belated tax return, any loss on account of capital loss, etc. cannot be carried forward for set-off in any subsequent year. Further, there shall be additional interest liability for delay in filing the ITR in case of any outstanding tax liability.

If a tax return is filed after July 31st, an additional fees upto INR 5,000 shall be applicable in case of each individual. However, if the total income of the person filing such return does not exceed INR 5 lakh, the additional fees payable shall not exceed INR 1,000.

Lastly, if in case there is a requirement of tax audit, then the due date to file the Income tax return is October 31, 2022.

Tax regime

At the time of return filing, there is an option to re-elect the new or old tax regime. The selection of new or old tax regime will affect the computation mechanism, as several exemptions and deductions are not allowed in the new tax regime. The selection of old or new tax regime can be done every year by salaried individuals with salary income. However, the selection of tax regime can be done only once by the individuals carrying on business and can be changed only once in the subsequent years.

Computation, correct return form and reporting

Depending on the type of income, quantum of income and other specific aspects, an individual must choose the correct income tax return form or ITR form (i.e., ITR 1, ITR 2, etc).
Along with the ITR, the correct computation of income is extremely crucial. Taxes must be computed on all incomes accurately, specially keeping in mind any income which is specifically exempted or taxable at a concessional rate as per the Income tax laws. The correct amount of tax deduction at source, advance tax paid earlier (if any), should be considered. Any short payment of tax will have to be deposited along with the applicable interest and penalty (if any).

It is crucial to ensure that the correct reporting of all incomes – salary, interest incomes, dividend, capital gains, rental incomes, interest on employee’s contribution to Employee Provident Fund (EPF) exceeding INR 250,000 in a year, amongst others, is based on the valid supporting documents such as bank account statements, annual withholding certificates issued by the employer, capital gains statements, etc. While disclosing salary income in the salary schedule, a correct breakup of the salary and perquisite should be carefully filled in along with any income from the retirement benefit account maintained in an overseas notified country.

Similarly, for the purpose of availing any deductions such as for donations, insurance premiums, the same has to be availed basis the valid receipts, certificates issued in specified form for the donations made, housing loan certificate and other documents.

However, one has to be mindful, as several deductions and exemptions cannot be claimed if the individual has chosen to be taxable as per the new tax regime. For example, deduction under section 80 G of the Income tax Act, 1961 for donations or deduction under section 80 TTA for the interest incomes, is not available in the new tax regime.

If an individual’s total income exceeds INR 50 lakh in a tax year, then he/she would also be required to disclose the specified assets and liabilities (as on the last date of the tax year) in the ITR form.

Also, an individual has to provide a correct declaration on whether he/she holds any directorship or any unlisted share during the tax year.

Any tax deferred on ESOP related perquisite income from the eligible start-ups, is to be provided in detail in the ITR form in the specified schedule.

Apart from this, exempt income, carry forward and brought forward losses should also be carefully completed.

Also, it is mandatory to provide bank account details as specified and the bank account needs to be pre validated to obtain Income tax refund, if any.

Annual Information Statement (AIS) and Tax Information Summary (TIS)

Recently, the tax authorities have rolled out a functional enhancement, to ensure ease of compliance in a timely manner:

  • AIS is a comprehensive statement containing details of various forms of the financial transactions undertaken by an individual in a tax year. It inter-alia contains the information relating to income earned from various sources such as salary, dividend, interest from savings account, recurring deposits, sale and purchase of equity shares, bonds, mutual funds etc. The statement also contains information related to tax deducted at source and tax collected at source.
  • TIS is a category-wise aggregated information summary for a taxpayer for simplification. For example, the aggregate amount of interest, dividends etc. from different accounts, shares is provided in a brief summarized version.

The purpose of such AIS and TIS is to consolidate transactions, incomes and taxes for a tax year into one statement and provide a checklist to the assessee to ensure that no reportable income has been missed.

It is an individual’s obligation to reconcile AIS, TIS and also Form 26 AS (statement containing details of taxes deducted on various incomes, details of other pre-paid taxes, other specific transactions etc.) and thereafter file the respective Income tax return. These forms are available and needs to be downloaded, from the e-filing portal prior to filing the Income tax return.

Global mobile employees

In case of globally mobile employees, the determination of the correct residential status based on their physical presence in India, is extremely important. Basis their residential status, the tax implications in India could be determined.

Foreign assets and income

Moreover, individuals who qualify as ordinary residents in India and having overseas assets and incomes, are mandatorily required to disclose the same in their ITR forms in the specified schedules.

Non-disclosure of Assets and Liabilities outside India in the ITR may result in implications under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 as well. Hence, this requirement is crucial, wherever applicable.

Tax treaty

If in case any foreign tax credit has been claimed as per the double tax avoidance agreements or tax treaty between India and other countries, then it is mandatory to file Form 67 prior to filing Income tax return form.

In case any other benefit, for example special tax rate for interest incomes, basis the tax treaty is availed or any other benefit, then the Tax residency certificate from the overseas country should be obtained, and the related column should be appropriately filled in the Income tax return form, as applicable.

Summary

In order to be compliant with the tax laws one should be aware about these aspects of filing the tax return and accordingly file a correct and an accurate tax return before the due date. This is also considering the consequences for non-filing or non-timely filing of tax returns.

(The author is Partner and Head, Global Mobility Services – Tax, KPMG in India)