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Filing Return of Income under the new ITR Form Series (A simple guide)

As we are all aware that the CDBT has vide notification dated 15-05-2007 issued a new set of Forms to be filled in for the Assessment Year 2007-08 and it is effective from 15-05-2007.

Following is a small and simple guide to filling the forms.

Documents to keep ready

It is always advisable to keep all the documents required for preparation of the income tax return ready and handy before calculating your tax liability and preparing your tax return. Some common documents required by an individual for preparing the return are:

  • Form No. 16 (received from the employer): This will help to know your income from salary and tax deducted by your employer from your salary income.
  • Form No. 16A (received from all the payers who have deducted tax): You will first have to get this form collected from the parties who have deducted tax while making payment to you during the year. This includes banks and companies (with whom you have kept fixed deposits), parties to whom you have given loan, tenant to whom you have rented your property, et cetera.
  • Balance Sheet and Profit and Loss Account
  • Tax Audit Report, if any
  • Working of FBT
  • Certificate of MAT working (in case of Companies).
  • Summary of all bank accounts operated during the year: This summary will give an idea about all the income earned during the year and investments and expenditure incurred. This assures that no part of income is left out and you do not miss out any eligible deductions.
  • Summary of all other earnings including Interest on Fixed deposits, Dividends earned etc.
  • Copies of all investments made to claim deductions viz LIC Premium Receipts, PPF Copy, Copies of other investments etc.
  • Details of property owned during the year: If you have bought some property during the year, you will need details of rent received and receipts of municipal tax paid during the year. In addition to this, if you have taken this property through a loan, do carry the loan details and a copy of certificate of interest paid during the year.
  • Sale & purchase bill / documents / contract note in respect of investments / assets sold during the year: You will also need purchase documents corresponding to the sales made during the year. In case of a large number of transactions, it is advisable that you prepare a statement of sale and corresponding purchase of these investments and arrive at the amount of profit or loss, before actually calculating your taxable income.
  • Details of tax payments made during the year: This is required only if you have made advance tax payment during the year.

Which ITR Form is applicable to you?

With the introduction of new income tax return forms based on nature of income earned during the year, one needs to know relevance of each return form and select the right form.

For an individual, four forms have been introduced, the details of which are as under:

Form No.

Applicability

ITR - 1

Meant for Individuals, who have

a) Income from salary

b) Interest income (taxable / exempt)

c) Family pension

d) Income from agricultural activities

In other words, this form is not applicable in the following situations:

a) Individual having any income (taxable / exempt)

other than mentioned above

b) Any brought forward loss of earlier years

c) Any income of other person to be included

d) Any person having Income / Loss from House

Property

ITR - 2

Individuals / HUF not having any income on account of carrying out business / profession or on account of being a partner in a partnership firm.

It includes individuals who have only Salary Income but want to claim Interest on Housing Loans

ITR - 3

Individuals / HUF who are partners in a partnership firm and does not carry out any other separate business / profession.

In other words Individuals / HUFs who are Partners in a firm but who do not carry out any independent business of their own.

ITR – 4

Individuals / HUF who is carrying out business / profession under a proprietary concern.

ITR – 5

Firms / AOP / BOI (other than Trusts claiming exemption u/s 11) and this includes the Fringe Benefit Tax Return.

ITR – 6

Companies (other than Companies claiming exemption u/s 11) and this includes the Fringe Benefit Tax Return.

ITR – 7

Trusts and Companies claiming exemption u/s 11 and this includes the Fringe Benefit Tax Return.

ITR – 8

Return of Fringe Benefits

Acknowledgement Non E-filing

Acknowledgement to be filled in case of filing in Physical Form

ITR – V

Acknowledgement to be filled in case of Electronic filing without a Digital Signature

Last date for filing tax returns

The last date for filing return of income for the year ended March 31, 2007 for Individuals, Firms, Trusts, AOP, BOI, Co-operative Societies and Local Bodies (Other than those who are required to get their accounts audited) is July 31, 2007 and for Companies and others, it is October 31, 2007.

Consequences for not filing tax return by the last date

If individuals file their returns after the last date mentioned above, they will be charged a penal interest at the rate of 1% per month of delay on the taxes, if any remaining unpaid. However, if such a return is filed after March 31, 2008, apart from the penal interest, they will also be liable for a penalty of Rs 5,000.

How to file the tax return

Today there are two options available to the individuals to file their return of income:

  • Electronic filing;
  • Physical filing

It is mandatory for Companies and Firms who are required to get their accounts audited under the Income Tax Act, 1961 to file their returns through Electronic Filing only.

As a temporary relief to firms, The CBDT has temporarily allowed them to file returns in Physical Format, till the Software is ready and subsequently they have to again file the Returns in Electronic Form.

Under Electronic filing, the individual will have to follow the following procedure:

  • Get the tax return in a valid XML format (through the Income Tax department site or other online tax preparation sites)
  • Visit the Income Tax site http://www.incometaxindiaefiling.gov.in
  • Log on using the user-ID and password (username is usually the 10 digit PAN No.)
  • Select the respective ITR form
  • Upload the XML file generated
  • Upon uploading, an acknowledgement will be generated.
  • If the file is uploaded with a digital signature, then the process of filing return is completed.

However if the file is uploaded without a digital signature, the individual will have to print form ITR-V and submit the same to the Income Tax department physically. The process of filing return will be completed only on physical filing of ITR-V.

For Physical filing, the individual will have to take a print out of the respective ITR form along with the Acknowledgment form and file it with the Income Tax Officer.

Whether it is electronic filing or physical filing, under the new procedure, individuals do not have to attach any documents or enclosures with the return of income, except a Report on Transfer Pricing, which needs to be attached along with the acknowledgement.

Kindly go through the Instructions thoroughly before filing the forms and fill out the proper codes wherever applicable.

Fill in all the coloumns and in case some coloumn is not applicable just mention N A or 0.

It thus becomes very important to scrutinize the forms properly before submitting, so that one can ensure that no part of the form is left unfilled or not properly filled, which may lead to several consequences under the Income Tax Act, 1961.

In case of Individuals and HUF it is also important to fill in the details of transactions reported through Annual Information Report (If any) like

  • Cash deposits aggregating to ten lakh rupees or more in a year in any savings account maintained in a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applied (including any bank or banking institution referred to in section 51 of that Act)
  • Payment made against bills raised in respect of a credit card aggregating to two lakh rupees or more in a year.
  • Payment made of an amount of two lakh rupees or more for purchase of units of Mutual Fund.
  • Payment made of an amount of five lakh rupees or more for acquiring bonds or debentures issued by a company or institution.
  • Payment made of an amount of one lakh rupees or more for acquiring shares issued by a company.
  • Purchase of any immovable property valued at thirty lakh rupees or more.
  • Sale of any immovable property valued at thirty lakh rupees or more.
  • Payment made of an amount of five lakh rupees or more in a year for investment in bonds issued by Reserve Bank of India.

Documents to preserve

Since the tax-payer is not required to submit any additional documents along with the return of income, the documents may be called at the later stage by the Income Tax Officer to check the correctness of the claim made. Hence, it is advised that the individual preserve all the documents required to substantiate the return of income filed. Some of the documents are enumerated below:

  • Detailed calculation of taxable income and amount of tax payable / refundable.
  • Balance Sheet and Profit and Loss (If any prepared)
  • All Audited Accounts
  • Audit Reports
  • Tax Audit Reports
  • MAT report under section 115JB
  • Form No. 16 / 16A (original).
  • Counterfoil of all the tax payments made during the year.
  • FBT Challans.
  • Computation of FBT
  • Computation of Depreciation under Income Tax Act, 1961
  • Copy of documents concerning sale of investments and properties.
  • Copy of bank statements.
  • Copy of proof for all the deductions and exemptions claimed in the return of income (viz. PPF Challans, LIC Premium Receipts, Mediclaim Receipts to name a few)

Common mistakes people make while filing tax returns

  • The most common notion among salaried employees is that since tax has already been deducted from their salary, there is no need to file their income tax returns. This is not at all true or legal. Even though tax has been deducted and there is no further liability to pay tax, an employee has to compulsorily file his / her income tax return. Form No. 16 received from employer is not their income tax return.
  • Employees do not include the interest that they receive on their savings bank account. The entire interest earned on your savings bank account is taxable.
  • Omission of income received by a minor child. A minor child is not required to file a separate return of income. However, this income has to be included in the hands of either of the parents, although it might be a small amount of bank interest.



Category Income Tax, Other Articles by - CA. Gurdeep Singh Chawla 



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