It is necessary for taxpayers to understand some important provisions of the Income-Tax Act which will help them avoid any serious mistake while filing their income tax return.
We generally exercise due care while dealing with our financial and taxation matters. However, in a hurried bid to file income tax return (ITR) before the due date, there remains the possibility of committing serious mistakes. Thus, it is necessary for you to understand some important provisions of the Income-Tax Act which will help you avoid any serious mistake while filing your income tax return.
Here, we have enlisted 10 things about filing of returns you probably don’t know about, but you should be well aware of.
1. Holding a PAN doesn’t mandatorily mean to file return
Many people believe that if they have the PAN, it is mandatory for them to file the income-tax return. The return of income is required to be filed if one’s gross total income is more than the maximum exemption limit. Thus, if you have been allotted a PAN but your income is below the threshold limit, you can file the return voluntarily but there will not be any obligation on you to file it. Once you become liable to file the return, then you can’t escape this obligation albeit the due taxes have been paid to the government by TDS or as advance tax.
2. Mandatory to file return to report overseas assets
It is mandatory for a person, being a resident and ordinarily resident in India, to file the return if he has signing authority in any account (like foreign bank accounts) or any asset (like a house or car) or any financial interest (like shares in any foreign company) in any entity located abroad. The condition as to income exceeding the threshold limit doesn’t apply to these assesses. It is also mandatory to mention details of such account, assets or financial interest in the return of income.
3. Furnishing details of Assets and Liabilities
It is mandatory for an Individual to furnish the details of his assets and liabilities in the income-tax return if his income exceeds Rs 50 lakh. The Schedule AL in ITR 2, ITR 3 and ITR 4 requires the taxpayer to provide the address and cost of each immovable property possessed by him. It also requires the cost of acquisition of other assets owned by the taxpayers, i.e., movable assets, jewellery, vehicles, bank balance, shares, insurance policies, loans or advances given, etc. All liabilities outstanding against these assets are also reported in this schedule, i.e., bank loans, loan from relatives, etc.
4. Taxpayers exempted from quoting Aadhaar number in ITR
It is generally believed that Aadhaar number is mandatory to file income-tax returns. However, following categories of individuals have been exempted from quoting the Aadhaar number in ITR:
a) An individual who is residing in the states of Assam, Jammu and Kashmir and Meghalaya.
b) An individual who is a non-resident as per provisions of the Income-tax Act, 1961.
c) An individual whose age is 80 years or more at any time during the previous year.
d) An individual who is not a citizen of India.
5. Fee for delay in filing of the ITR
From this year, delay of even one day in filing of income-tax return would cost you Rs 5,000. A late filing fee of Rs 5,000 shall be charged if the return is filed between August 1, 2018 (now extended to September 1) and December 31, 2018. The fees shall be hiked to Rs 10,000 if return is filed between January 1, 2019 and March 31, 2019. The late filing shall be only Rs 1,000 for small taxpayers whose taxable income is up to Rs 5 lakh.
So, to avoid this burden, you need to file ITR on or before July 31, 2018 (which has now been extended to August 31 for FY 2017-18). This late filing fee has to be paid irrespective of the circumstances that caused such delay in filing of return.
6. Chose the ITR Form wisely
The CBDT has issued 7 ITR forms. Each ITR form is meant for specific category of taxpayers to report the specified income. If you choose a wrong ITR form, it is likely that you will not report the complete information in ITR and the tax department can issue you a notice for under reporting of the income. For an individual, whose sole income is from employment, the return can be filed in ITR-1 (if total income is below Rs 50 lakh) or ITR-2.
7. Limit on Set-off of loss from House Property
Section 71 allows set-off of losses from house property against any other income. With effect from Assessment Year 2018-19, such losses can be set-off only to the extent of Rs 2,00,000. The balance losses can be carried forward for 8 years to be set-off against future income from house property.
8. ITR Filing of deceased
It is mandatory for the legal heirs to file the return of the deceased person to report the income earned during the period from April 1 till the date of death. In order to file the income-tax return on behalf of the deceased person, an authorized person has to register himself as the legal heir of the deceased person on the e-filing website www.incometaxindiaefiling.gov.in
9. Not mandatory to send the ITR-V to CPC Bengaluru
The income-tax return is deemed to be filed as per the requirement of law only if the taxpayer, after filing of return, verifies it. Verification of return is mandatory to get it accepted and processed by the Centralized Processing Centre (CPC) of the Income-tax Department. An income-tax return can be verified with Digital Signature, Electronic Verification Code, Aadhaar-based OTP or by submission of acknowledgement to CPC Bengaluru.
It is not mandatory to send the signed physical copy of ITR-V to CPC Bengaluru after E-filing. One can e-verify it via Aadhaar-based OTP or by generating Electronic Verification Code. EVC can be generated through Net Banking, Bank account number, Demat Account Number or Bank ATM. If the ITR is verified using any of the above methods, then the physical copy of ITR-V need not be sent to the CPC Bengaluru.
10. Non-Resident Individuals cannot file form ITR-1
The new ITR-1 form has been withdrawn for a non-resident. Therefore, a non-resident person will have to choose either Form ITR-2 or ITR-3 to file his return of income for the Assessment Year 2018-19.
(By CA Naveen Wadhwa, DGM, and CA Tarun Kumar, Assistant Manager, Taxmann.com)