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Most of us have less than three weeks left to file our tax return
and as all of us know only too well, this has to be done using the new
Income Tax Return (ITR) forms that have replaced Saral — forms that are
lengthy, intimidating and full of jargon. In any case, this article is
not about comparing the pros and cons of the new forms against the
erstwhile Saral.
This is a pointless exercise — the government has specified that the
new forms will have to be used and like it or not, that’s what we will
have to do.
Do you have to file a tax return?
The basic exemption limits are Rs 1,00,000, Rs 1,35,000 and Rs 1,85,000 for men, ladies and senior citizens respectively.
Earlier, one had to file a return only if the net income after
deductions was higher than the basic exemption limit. However, now,
even if the income is higher at the gross level, a return has to be
filed.
In terms of an example, say Rashmi earned a salary of Rs 2 lakh. She
also invests Rs 70,000 in PPF. Therefore, her net income was Rs
1,30,000. Now, since Rs 1,30,000 is lesser than the Rs 1,35,000 basic
exemption, earlier, Rashmi needn’t have filed a tax return.
However, now, on account of her gross income of Rs 2 lakh being
higher than the basic exemption, she is legally obligated to file a tax
return, even if such a return is a nil tax one.
Details of the forms
As mentioned in the table, there is a unique form for each category
of taxpayer. If you earn only salary, pension and interest income, you
can file ITR-1. Note that there are two versions of ITR-1; both are the
same, only that one has larger fonts than the other.
However, apart from salary and/or interest, if you earn rental
income, capital gains or even dividends from mutual funds or shares,
you will have to use ITR-2. It doesn’t matter that dividend income is
exempted, if you receive it, ITR-2 it is.
Then again, if you have any business income, then ITR-4 will have to
be used, notwithstanding any other types of income that you may earn.
No document (including TDS certificate) should be attached to this
form. In fact, the official receiving the return has been instructed to
detach all documents enclosed with the form and return the same back to
the taxpayer. Also, unlike Saral, this form is not required to be filed
in duplicate.
I am going to largely dwell on ITR-2 as this the most commonly applicable form.
General scheme of the form
The form has two basic parts - Part A and Part B. There also are
fifteen work tables referred to as “schedules”. The first part, i.e.
Part A, mainly seeks general information in terms of requiring
identification data such as name, address, PAN, etc.
Part B requires the taxpayer to summarise the incomes under various
heads — you can look upon it as an outline of your total income and tax
computation.
Then come the schedules where details of incomes under various heads
and other specifics like set-off and carry forward of losses, clubbing
of income, deductions claimed (Sec. 80C etc), declaration of exempt
income (PPF interest, long-term gains on equity and dividend income
etc.), TDS and advance tax details, etc have to be stated.
Therefore, essentially, these schedules substitute the annexures
that were earlier required to be attached along with Saral. For the
common taxpayer, most of the schedules will simply not be applicable
and the same should be indicated therein.
Note that since it is the data from the schedules that ultimately
feeds into the summary tax computation, you need to first fill out of
the schedules that are applicable to you.
Therefore, the sequence of filling out the form should ideally be —
first fill Part A that requires general information. Then directly jump
to the schedules and then taking the data from the schedules, fill out
Part B. If you try Part B first, it will only be confusing.
There is one particular Schedule called AIR that requires a little
bit of discussion. In this schedule there are seven types of
transactions, if undertaken during the year, that the taxpayer has to
mention. These are:
Cash deposits of Rs 10 lakh or more in any savings account
Credit card payments of Rs 2 lakh or more
Mutual fund investments of Rs 2 lakh or more
Investment in any bonds or debentures amounting to Rs.5 lakh or more
Payments of Rs 1 lakh or more for shares issued by a company
Property purchase or sale of Rs 30 lakh or more
Investment in RBI bonds of Rs 5 lakh or more
Even
though, prima facie, this appears to be a simple reporting of the
specified transactions, there arise a number of issues. For most of the
items, it is unclear whether information on each transaction (if it is
above the limit) has to be separately mentioned or it is the cumulative
amount.
Then again, treatment for joint holdings is not clear. For credit
cards, what about the treatment for corporate card payments (as against
personal payments) where the company reimburses the individual?
How does one treat SIPs? For shares, whether secondary market
purchases need to be included? Should it be the net amount (purchase
minus sale) or the gross one? What about under-construction property
where payments are made in instalments?
Since no clarifications are coming, it is suggested that in this
regard, a taxpayer errs on the side of caution. When in doubt, give
more information than what you think necessary — there is no penalty
for extra information, but not the other way around. Basically, if you
have nothing to hide, what can the taxman find?
However, notwithstanding the above, the core problem with the form,
in my view, is the widespread use of income-tax jargon, not only in the
language but also in terms of references to section numbers and
provisos of the Act.
Though it is possible for one to fill the form on one’s own, I would
suggest that for the first year at least, it would be advisable to seek
professional help. Once you get familiarised with the general format
and flow of the form, from next year on, you can do it yourself.
Apart from the usual chartered accountants (CAs), the government has
specified that specially trained tax return preparers (TRPs) can be
employed to file returns for a nominal fee of Rs 250. Details of TRPs
in your area can be found at http://www.trpscheme.com/trp/index.jsp.
Summing up
Though the intention of the government behind the TRP initiative is
good, reportedly not all of them are fully ready yet. Also, TRPs need
to be available in every location of the city or town and it will take
time for them to reach a critical mass such that they become really
effective.
This itself is enough cause to postpone the last date for filing.
Plus, the uncertainty regarding the AIR schedule needs to be addressed.
Lastly, the design of the new forms, in a bid to be as comprehensive as
possible, seems to have compromised somewhat on accuracy. There are
some typos and other arithmetical errors in the flow that need to be
ironed out.
In the light of all of the above, should the due date of filing the
return be forwarded to say 30th of September, it would save the common
taxpayer not only money (in view of the higher fees that CAs generally
charge vis-a-vis a TRP) but an immense amount of inconvenience. |
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