While the due date for filing the tax return for FY 2018-19 is July 31, 2019, if one has not yet filed the tax return for FY 2017-18, there is time only till March 31, 2019 to do so.
The Financial year (FY) 2018-19 will end on March 31, 2019. While the due date for filing the tax return for FY 2018-19 is July 31, 2019, if one has not yet filed the tax return for the previous financial year, i.e., FY 2017-18, or is required to revise the tax return, there is time only till March 31, 2019 to do so. However, there will be late filing penalty of Rs 10,000 since the tax return for FY 2017-18 has not been filed before the due date.
Whatever be the case, the taxpayer should be mindful of the following while filing tax returns:
1. Determine your residential status
The scope of income which is liable to tax in India depends on the residential status. Residential status is determined based on an individual’s physical presence in India. If an individual’s physical presence in India exceeds 181 days during the relevant financial year and also exceeds 729 days during the preceding 7 financial years, he will qualify to be “resident and ordinarily resident” (ROR) in India and will be taxable on his global income. However, if an individual qualifies as non-resident, he will be subject to tax only on his Indian sourced income or any income received in India. The residential status needs to be correctly determined for each financial year and needs to be selected accordingly in the tax return Form. The residential status also determines the ITR Form that has to be used and the types of disclosures that may be required.
2. Keep all documents handy
It is advisable to collate all necessary documents such as bank statements for the year, Form 26AS, Form 16, rental agreement, if any, housing loan certificate, sale deed and purchase deed (in case of any sale of assets during the year) in support of the income earned during the year to avoid last minute rush while filing the returns. It is necessary to retain all supporting documents for a few years so that the same can be provided to tax authorities in case any queries are raised for the relevant financial year.
3. Check previous year tax filing
It is also important to look into the prior year’s tax return filed to ensure that any losses claimed in earlier year(s) is properly disclosed in the current year tax return or if there are any gains in the current year eligible for set-off, the same is taken into account for set-off against such previous year losses.
4. Check on ITR Form to be used
There are different types of income tax return (ITR) Forms – ITR 1 to ITR7. The correct Form needs to be used while filing of the tax return. The usage of Form depends on the source of income, ownership/ nature of assets etc. For instance, an individual whose primary source of income is salary/pension, can use ITR-1 to file the tax return. However, if an individual has any foreign assets such as bank accounts, brokerage accounts, it is mandatory to use ITR 2 for tax return filing.
Reconciliation of Form 16, Form 26AS and other documents reflecting income earned / received, taxes paid is of prime importance to avoid non-reporting or additional reporting of income/deductions. The income and deductions reported in Form 16 and amounts reflecting in Form 26AS, should be verified. Any mismatch between the tax return, Form 16 and Form 26AS can lead to queries from tax authorities. The method of account of income from other sources needs to be applied consistently through the years. For instance, if interest income has been considered on receipt basis in the earlier year, the same basis would apply in the current year as well. Consequently, any tax deducted on such income should be claimed in the year that income is offered in the return of income.
6. Linking of PAN with bank account
It is also necessary to link the PAN with a bank account as the refund will be credited electronically only with effect from March 1, 2019. The taxpayer is also required to pre-validate their bank account in the income tax portal. The pre-validation option is available under the “profile settings” once you have logged into the income tax portal.
7. Reporting requirements in tax return
Every tax payer who qualifies to be ROR (resident and ordinarily resident) in India should report details of foreign assets held during the tax year in the India tax return. The assets may include bank accounts, financial interests in any entity, immovable property and any other capital asset held overseas etc.
Separately, tax payers whose total taxable income exceeds Rs 50 lakh during the relevant tax year should report the details of assets and corresponding liabilities held as on March 31 of the relevant tax year in the India tax return. The assets include land, building, cash in hand, jewellery, bullion, vehicles, yachts, boats and aircraft, bank (including all deposits), shares and securities, insurance policies, loans and advances given. It is important to note that the value of assets and liabilities needs to be reported on cost basis and not on basis of market value.
8. Claim deductions
If you have not been able to submit proof of various deductions such as life insurance payment, tuition fees, medical insurance receipt, to your employer, you can still claim the same in your tax return. Please ensure to keep supporting documents so that the same can be provided to tax authorities, if requested.
9. Form 67
A taxpayer is mandatorily required to file Form 67 online with the return of income if any credit for foreign taxes paid, is being claimed in the tax return. Form 67 reflects the breakup of each source of foreign income, tax paid outside India on such income and foreign tax credit to be claimed as per the provisions of the relevant Tax Treaty. This Form has to be furnished along with the certificate/statement (from the overseas tax authority, person responsible for tax deduction overseas or the employee) specifying the nature of income and the amount of tax paid by the employee.
Once the tax return is filed electronically, it is mandatory to verify the tax return with Aadhaar/net banking option within 120 days. In case the same is not feasible, then the signed ITR-V acknowledgement needs to be couriered within 120 days from the date of filing. In case the tax return is not e-verified/not posted within 120 days, the tax return filed will be considered invalid.
The Tax Department has introduced several additional disclosure details in the ITR Forms over the last few years to detect non-compliance and tax evasion. It is important for taxpayers to update themselves with the changes so that tax return is filed correctly with proper disclosures. One also needs to wait for changes in updated ITR Forms, expected to be released during April.
(By Tapati Ghose, Partner, Deloitte India, and Sumit Jain, Manager, Deloitte Haskins & Sells, LLP)