As the due date for filing income tax return is only a few days away, it’s time to get one's act together, understand the requirements and do the necessary filing.
For those individuals who haven’t yet filed their tax returns, the due date for which is 31st July, it’s time to get the act together, understand the requirements and do the necessary filing. Some key points in this regard have been summarized hereunder:
All individuals whose gross total income (before deductions) exceeds Rs 2,50,000 and Rs 3,00,000 (for senior citizens) are mandatorily required to file tax returns on or before the due date, July 31.
Collating all documents
It is advisable to collate all supporting documents to the returns as may be applicable. These could include Form 16, rental agreement, housing loan certificate, tax paid proofs (advance tax, self-assessment tax, municipal tax), sale deed and purchase deed (on sale of assets), transaction statements for shares/mutual funds, bank statements, proofs for taxes deducted at source (by employer, bankers, tenants, purchaser of property and others), proofs for deductions, foreign tax return, etc.
Disclosing all income
Taxpayers have to be more cautious in reporting all the income that is taxable and disclosing details as required in the income tax return (ITR). Given increased focus of tax authorities on the accuracy of tax returns being filed, the interest and penal consequences for failure to do so, the need for taking a cautious approach cannot be over emphasized.
Filing the correct ITR
Determination of the correct income tax return form is at the outset critical since there are notable changes in the current year:
1. ITR-1 is applicable to a Resident and Ordinarily Resident* individual / Hindu Undivided Family (HUF) and those whose income includes
# Salary income
# Income from One House Property (excluding cases where there is brought forward loss or loss to be carried forward from previous year); or
# Income from Other Sources (excluding winning from lottery, race horses etc.)
*The individual should not have any income from overseas, should not hold any asset outside India, should not claim any relief under Section 90 and income should be less than Rs 50 lakh, etc
2. ITR-2 is applicable to an individual/HUF whose total income does not include income under the head “Profits or Gains of Business or Profession”.
3. ITR-3 is applicable to an individual/HUF who is having income under the head “Profits or Gains of Business or Profession” and who is not eligible to file ITR-4.
Shares not listed on Indian stock exchanges would be regarded as unquoted shares. Where there is a transfer of unquoted shares in a company, higher of sale consideration or FMV of shares (as determined in a manner as may be prescribed) will be deemed the full value of consideration for computing capital gain. Individuals must take into account this new provision while preparing and filing the ITR.
Reconciliation of Form 16, Form 26AS and other documents reflecting income earned / received, taxes paid is of utmost importance to avoid non-reporting or additional reporting of income/deductions. The income and deductions reported in Form 16 and amounts reflecting in the Form 26AS should be verified.
Under-reporting of income or over-reporting of deductions
The Income Tax Department has already raised concerns regarding salaried taxpayers’ under-reporting income or inflating deductions, aided and abetted by unscrupulous intermediaries. The department has also clarified that it has an extensive risk analysis system aimed at identifying persons who are non-compliant.
The department has issued a cautionary advisory not to submit wrong claims in their ITRs, which would be treated as cases of tax evasion and will also result in delay of refunds. Reporting the income and deductions in the tax returns as per the documents and proofs available will help in avoiding unnecessary notices from the tax authorities.
Non-filing of the tax return within the due date
A fee for default in filing the tax return within the due date is to be levied as follows:
Fees in INR
If return is filed on or before December 31 & income exceeds Rs 5,00,000
If return is filed after 31 December & income exceeds Rs 5,00,000
If total income does not exceed Rs 500,000
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 relevant Tax Treaty. This form has to be furnished along with the certificate/statement (from the overseas tax authority or responsible person for tax deduction or employee) showing proof of taxes paid stating nature of income and tax deducted thereon.
Individuals claiming foreign tax credit in the India tax return have to mandatorily file this form on or before the due date for filing the tax return.
After uploading the tax return, it is mandatory to verify the tax return with Aadhaar/net-banking option. 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.
The Tax Department has introduced several additional disclosure details in the ITR forms to detect non-compliance and tax evasion. Examples are the sections on salary income, house property income etc. At the same time, the tax department has taken several steps for ease of filing accurate returns. One needs to take advantage of these measures to ensure they are on the right side of the tax laws.
(By Tapati Ghose, Partner, Deloitte India and Robin Bose, Assistant Manager, Deloitte Haskins and Sells LLP)