Individuals now have time to file their ITR for FY 2018-19 by 31 August, 2019. Here are some critical aspects that should be kept in mind while filing income tax returns.
ITR Filing 2019: With the extension provided by CBDT, individuals now have time to file their income tax return for FY 2018-19 by 31 August, 2019. However, despite the relaxation in the tax filing deadline, taxpayers should exercise caution as interest for an additional month will be levied if there is a tax payable.
Here are some critical aspects that should be kept in mind by individuals while filing their income tax returns:
The Permanent Account Number (PAN) is mandatory and should be correctly mentioned in the return. The return needs to be filed electronically where one’s total income exceeds Rs 5 lakh and while filing the return electronically, it is mandatory to mention one’s mobile number and email ID.
Determination of residential status is a basic check that is required. This is determined based on the number of days of stay in India. Please ensure this is verifiable from passport stampings. The Aadhaar number is also mandatory (an exemption is given only for some non-resident assessees, foreign nationals, super senior citizens, and people residing in certain places like Assam, Jammu & Kashmir and Meghalaya). The Aadhaar number should be linked with the PAN for resident individuals.
Salaried employees, individuals and senior citizens having total income of less than Rs 50 lakh would need to file the tax return by using Form ITR 1 (where the individual qualifies to be a resident and who is neither a Director in a company nor has invested in unlisted equity shares, does not have income from capital gains/more than one house property/ agricultural income exceeding INR 5,000/foreign assets etc.) Taxpayers who are non-resident in India, who have overseas assets, total income in excess of INR 50 lakh, capital gains income, more than one house property, having brought forward losses, agricultural income exceeding Rs 5,000 would need to file Form ITR 2.
Watch: ITR 2019: What details to check before submitting ITR form?
Taxpayers being partners in a firm / having business income would need to file Form ITR 3 and resident taxpayers who have opted for the presumptive income scheme having total income up to Rs 50 lakh would need to file Form ITR 4.
All exempt income would need to be reported in the income tax return. Please note that Form ITR 2 now mandates separate disclosures of the exemptions claimed. The relevant section under which exemption is being claimed also needs to be disclosed. Employees should ensure that the exemptions reported in Form 16 (Part B) issued by the employer is verified and reflected correctly in their tax return.
Taxpayers should view their Form 26AS (the annual tax credit statement) and consider credit for taxes collected at source / the taxes withheld from employer and others. The tax department also gives an option to prepare and file the return directly from the tax department’s portal. One should verify the pre-filled income (including salary) and TDS with the Form 16 / Form 16A and Form 26AS, before submitting.
All savings bank accounts held by an individual that have not been dormant for at least 3 years, are to be mentioned in the return along with the IFSC code. If one is claiming a refund in the tax return please be sure to indicate the preferred bank account for credit and pre-validate the bank account in the tax portal.
Individuals who have travelled or have assets and/or income from other countries have to be extra cautious about the income offered to tax and the disclosures required in the return. Where relief is being claimed in the return based on a tax treaty, specific disclosures are required which are more comprehensive for residents and ordinarily residents (ROR). These are to be supported by a tax residency certificate (TRC) or a Form 67 as applicable. The basis for relief and value of relief / exemption in the return should be adequately supported in case queried by the tax authorities at a later stage.
Taxpayers having total income of more than Rs 50 lakh would need to report their assets and liabilities in India as on March 31, irrespective of their residential status in India. In case, the taxpayer qualifies to be a ROR, both Indian and overseas assets and liabilities will need to be reported.
Income under each head should be properly calculated based on the provisions of the Act considering recent amendments. For instance, long-term capital gains from sale/redemption of equity shares/ mutual funds are taxable if the gain is in excess of Rs 1,00,000. In many cases, reliance may also need to be placed on judicial precedence.
All income should be considered and offered for tax or disclosed as exempt as the case may be. For example, savings bank interest earned has to be reported even though the amount is minimal. Several reliefs are available for investments or contributions made / expenses incurred. These should be properly analyzed as they provide a valid basis for reducing the taxable income. For instance, deduction up to Rs 10,000 is available for individuals on savings bank interest for those who are not senior citizens. However, a senior citizen can claim deduction up to Rs 50,000 in respect of the savings bank interest, post office deposits and bank deposits.
Finally, the individual has to verify in the tax return form that the information given in the return and the schedule thereto is correct and complete. Tax law provides for prosecution for false verification, which the individual either knows or believes to be false. The focus is on full disclosure. Taxpayers would be advised to provide correct information to avoid providing justification / clarification, or may face penal consequences as applicable in the future.
(By Tapati Ghose, Partner, Deloitte India; with Anandan N, Manager, and Chandrapal Solanki, Assistant Manager with Deloitte Haskins & Sells, LLP)