Income Tax Returns
Every assessee should file an annual return in prescribed form. The prescribed forms are as follows -
FORM NO. 1 - For Companies
FORM NO. 2 OR 2D - Firms, HUF, Individuals whose income includes ‘profits and gains of business or profession’.
FORM 2C – Those who are required to file return even if income is below taxable limit under proviso to section 139(1) – termed as 1 by 6 scheme.
FORM 3 or 2D - This form is mainly for resident individuals and HUF who do not have any income from business or profession.
In addition to the return, an acknowledgment form in duplicate is required to be submitted. The ‘acknowledgment’ is really summary of the income tax return. The duplicate of acknowledgment is returned by income tax department duly acknowledged. This serves as proof of the details of income submitted by assessee.
The income tax return is really a self assessment memorandum. The assessee should calculate the tax and interest payable by him and pay it by challan. The payment will of course be after deducting the advance tax which he might have already paid.
The return should be accompanied by * Salary certificate * Profit & loss account or income and expenditure account in case of business / professional income * Details of income from house property e.g. municipal valuation / rent received / taxes paid etc. * Copies of proofs in respect of investments made which qualify of income tax rebates * Copy of audit report if his accounts are required to be audited * Tax deduction certificate, if any tax was deducted when he had received the payment * Copy of challans of advance tax * Copy of challan of self assessment tax.
It is a practice to submit a summary sheet giving details of computation of income and tax payable, though such summary sheet is not a legal requirement.
The due dates for filing return are as follows -
* (a) Individuals having only salary income (b) Non-corporate assessees (Individuals, HUF, partnership firms or societies) having income from business or profession but who do not have to get their accounts audited under Income Tax or any other law - 31st July
* (a) Non corporate assessees (Individuals, HUF, partnership firms or societies) having income from business or profession and who have to get their accounts audited (b) A working partner where the firm in which he is a working partner has to get its accounts audited (c) Corporate Assessee (d) Persons who have to file return under one by six scheme – 31st October
The dates are mandatory and there is no provision to extend the due date. If the return is filed beyond due date, mandatory interest @ 1.25% per month of tax due is payable. Belated return upto one year beyond due date is permissible. Mandatory interest @ 1.25% is payable, but no penalty is payable. Thus, if no tax was due, belated return upto one year can be submitted without payment of any interest.
A loss return must be filed in time. Otherwise, the carry forward of loss is not permitted. However, CBDT can grant extension for submitting return by a loss making company.
The return should be signed by individual, karta of HUF, managing partner, managing director etc. In some cases, return can be signed by authorised representative.
The return should be filed along with proof of payment of tax, interest. Payment should be by self assessment challan.
No intimation will be sent by Income Tax Officer, if any tax / interest / refund is not due on the basis of return of income / wealth filed.
Scrutiny of returns - Some of the returns are taken by ITO for detailed scrutiny. Notice for scrutiny has to be served within 12 months from end of the month on which return is furnished. The ITO can require assessee to attend his office or produce evidence in support of the return filed. The assessment must be completed within two years from end of the relevant assessment year.
PAYMENT OF TAX - The advance tax and self-assessment tax should be paid vide challan No ITNS 268 (0020) in respect of corporates and ITNS 270 (0021) in respect of others.
From India, Bahadurgarh
47Every assessee should file an annual return in prescribed form. The prescribed forms are as follows -
FORM NO. 1 - For Companies
FORM NO. 2 OR 2D - Firms, HUF, Individuals whose income includes ‘profits and gains of business or profession’.
FORM 2C – Those who are required to file return even if income is below taxable limit under proviso to section 139(1) – termed as 1 by 6 scheme.
FORM 3 or 2D - This form is mainly for resident individuals and HUF who do not have any income from business or profession.
In addition to the return, an acknowledgment form in duplicate is required to be submitted. The ‘acknowledgment’ is really summary of the income tax return. The duplicate of acknowledgment is returned by income tax department duly acknowledged. This serves as proof of the details of income submitted by assessee.
The income tax return is really a self assessment memorandum. The assessee should calculate the tax and interest payable by him and pay it by challan. The payment will of course be after deducting the advance tax which he might have already paid.
The return should be accompanied by * Salary certificate * Profit & loss account or income and expenditure account in case of business / professional income * Details of income from house property e.g. municipal valuation / rent received / taxes paid etc. * Copies of proofs in respect of investments made which qualify of income tax rebates * Copy of audit report if his accounts are required to be audited * Tax deduction certificate, if any tax was deducted when he had received the payment * Copy of challans of advance tax * Copy of challan of self assessment tax.
It is a practice to submit a summary sheet giving details of computation of income and tax payable, though such summary sheet is not a legal requirement.
The due dates for filing return are as follows -
* (a) Individuals having only salary income (b) Non-corporate assessees (Individuals, HUF, partnership firms or societies) having income from business or profession but who do not have to get their accounts audited under Income Tax or any other law - 31st July
* (a) Non corporate assessees (Individuals, HUF, partnership firms or societies) having income from business or profession and who have to get their accounts audited (b) A working partner where the firm in which he is a working partner has to get its accounts audited (c) Corporate Assessee (d) Persons who have to file return under one by six scheme – 31st October
The dates are mandatory and there is no provision to extend the due date. If the return is filed beyond due date, mandatory interest @ 1.25% per month of tax due is payable. Belated return upto one year beyond due date is permissible. Mandatory interest @ 1.25% is payable, but no penalty is payable. Thus, if no tax was due, belated return upto one year can be submitted without payment of any interest.
A loss return must be filed in time. Otherwise, the carry forward of loss is not permitted. However, CBDT can grant extension for submitting return by a loss making company.
The return should be signed by individual, karta of HUF, managing partner, managing director etc. In some cases, return can be signed by authorised representative.
The return should be filed along with proof of payment of tax, interest. Payment should be by self assessment challan.
No intimation will be sent by Income Tax Officer, if any tax / interest / refund is not due on the basis of return of income / wealth filed.
Scrutiny of returns - Some of the returns are taken by ITO for detailed scrutiny. Notice for scrutiny has to be served within 12 months from end of the month on which return is furnished. The ITO can require assessee to attend his office or produce evidence in support of the return filed. The assessment must be completed within two years from end of the relevant assessment year.
PAYMENT OF TAX - The advance tax and self-assessment tax should be paid vide challan No ITNS 268 (0020) in respect of corporates and ITNS 270 (0021) in respect of others.
From India, Bahadurgarh
Hi All Have you gone through each topic under Income Tax - Guide Series posted. Please find same in word formate. Thanks and Regards Arun K Mishra
From India, Bahadurgarh
From India, Bahadurgarh
Latest guidelines on TDS on salary
2007-01-08 12:07 Source : Moneycontrol.com
Various guidelines and clarifications have been issued by the Central Board of Direct Taxes in respect of income tax deduction from salary income during the financial year 2006-07. These guidelines are contained in CBDT Circular No. 11 of 2006 dated The guidelines will help the salaried employees in particular as it discusses the various intricate aspects in greater depth. In this article some of the important features of this circular have been discussed which will help in correct computation of salary income and tax deduction on the same.
Method of tax calculation for salary and perquisites
In the opening paragraph the circular starts with the theme of method of tax calculation and provides that income tax is required to be calculated on the basis of the rates given in the Finance Act, 2006 and the tax shall be deducted on average at the time of each payment. No tax will, however, be required to be deducted at source in any case unless the estimated salary income including the value of perquisites, for the financial year 2006-07 exceeds Rs.1,00,000 or Rs.1,35,000 or Rs.1,85,000, as the case may be, depending upon the gender of the employee. With regard to the tax payment on non-monetary perquisites by the employer the circular states that an option has been given to the employer to pay the tax on non-monetary perquisites given to an employee. The employer may, at his option, make payment of tax on such perquisites himself without making any TDS from the salary of the employee. The employer will have to pay such tax at the time when such tax was otherwise deductible, i.e., the time of payment of income chargeable under the head ‘salaries’ to the employee. The income tax on the salary is to be determined at the average of income tax computed on the basis of rate in force for the financial year, on the income chargeable under the head ‘salaries’ including the value of perquisites for which tax has been paid by the employer himself.
TDS in case of change in employment
Nowadays there is a heavy shift of employment. Many employees go on changing their jobs on a regular basis. Where the employee during the year has changed from one employer to another the circular provides for deduction of tax at source by such employer (as the taxpayer may choose) from the aggregate salary of the employee who is or has been in receipt of salary from more than one employer. The employee is now required to furnish to the present/chosen employer details of the income under the head ‘salaries’ due or received from the former/other employer and also tax deducted at source there from, in writing and duly verified by him and by the former/other employer. The present/chosen employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer).
Claiming salary relief
For claiming relief when salary is paid in arrear or advance the circular provides for relief on submission of Form No. 10E.
Setting off loss against salary
If the employee claims a loss under the head ‘income from house property’ in respect of a self occupied residential house property then the employee should provide the details of such loss to the employer in a simple statement. These particulars earlier were required to be given in form 12C but now the said Form 12C has been omitted from the income tax rules, hence the particulars to this effect can be given in a simple statement. Similarly, in respect of any other income on which the employee desires tax deduction at source the particulars of the same should be submitted to the employer in the said statement.
The issue relating to claim of deduction on borrowed capital for computation of income from house property is really very important for most employees. The circular states that for the purpose of computing income/loss under the head ‘income from house property’ in respect of a self-occupied residential house, a normal deduction of Rs.30,000 is allowable in respect of interest on borrowed capital. However, a deduction on account of interest up to a maximum limit of Rs.1,50,000 is available if such loan has been taken on or after April 1, 1999, for constructing or acquiring the residential house and the construction or acquisition of the residential unit out of such loan has been completed within three years from the end of the financial year in which capital was borrowed. Such higher deduction is not allowable in respect of interest on capital borrowed for the purposes of repairs or renovation of an existing residential house. To claim the higher deduction in respect of interest up to Rs,1,50,000, the employee should furnish a certificate from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by such employee for the purpose of construction or acquisition of the residential house or for conversion of a part or the whole of the capital borrowed, which remains to be repaid as a new loan. The essential conditions necessary for availing of higher deduction of interest of Rs,1,50,000 are that the amount of capital must have been borrowed on or after April 1, 1999, and the acquisition or construction of residential house must have been completed within three years from the end of the financial year in which capital was borrowed. There is no stipulation regarding the date of commencement of construction. Consequently, the construction of the residential house could have commenced before April 1, 1999, but, as long as its construction/acquisition is completed within three years, from the end of the financial year in which capital was borrowed the higher deduction would be available in respect of the capital borrowed after April 1, 1999. It may also be noted that there is no stipulation regarding the construction/acquisition of the residential unit being entirely financed by capital borrowed on or after April 1, 1999. The loan taken prior to April 1, 1999, will carry deduction of interest up to Rs.30,000 only. However, in any case the total amount of deduction of interest on borrowed capital will not exceed Rs.1, 50,000 in a year.
Adjustment of excess or shortfall of TDS
It is clearly mentioned in the said circular that the provisions of sub-section (3) of section 192 allow the deductor to make adjustments for any excess or shortfall in the deduction of tax already made during the financial year, in subsequent deductions for that employee within that financial year itself. The procedural formalities relating to deposit of tax deducted and issue of certificate for TDS on salary income so also the aspects connected with penalty for failure to deposit tax deducted have been very clearly mentioned in the circular. Further the circular states that quoting of TAN and PAN is mandatory. As per law it is obligatory for persons deducting tax at source to quote PAN of the persons from whose income the tax has been deducted. Various obligations relating to quarterly statement of TDS etc., have been outlined in the circular. With regard to TDS on Income from Pension the circular states that the pensioners who receive their pension from a nationalized bank, the instructions contained in this circular shall apply in the same manner as they apply to salary-income.
The following incomes would be chargeable under the head Salaries on which the tax should be deducted at source:
(a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not.
(b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him.
(c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income tax for any earlier previous year.
Various perquisites on which tax is to be paid by the employees have also been enumerated in this circular. Similarly, the various tax deductions have been analysed at one place, which can be taken advantage of by the tax payers. The circular states that the drawing and disbursing officers should satisfy themselves about the actual deposits/subscriptions/payments made by the employees, by calling for such particulars/information, as they deem necessary before allowing the deductions. In case the DDO is not satisfied about the genuineness of the employee’s claim regarding any deposit/subscription/payment made by the employee, he should not allow the same, and the employee would be free to claim the deduction/rebate on such amount by filing his return of income and furnishing the necessary proof, etc., therewith, to the satisfaction of the Assessing Officer.
House Rent Allowance
While discussing the aspects relating to house rent allowance the circular states that it is to be noted that only the expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee subject to the limits laid down in rule 2A, qualifies for exemption from income tax. Thus, house rent allowance granted to an employee who is residing in a house/flat owned by him is not exempt from income tax. The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of rent before excluding the house rent allowance or any portion thereof from the total income of the employee. Though incurring actual expenditure on payment of rent is a pre-requisite for claiming deduction under section 10(13A), it has been decided by CBDT as an administrative measure that salaried employees drawing house rent allowance up to Rs.3,000 per month will be exempted from production of rent receipt. It may, however, be noted that this concession is only for the purpose of tax-deduction at source, and, in the regular assessment of the employee, the Assessing Officer will be free to make such enquiry as he deems fit for the purpose of satisfying himself that the employee has incurred actual expenditure on payment of rent.
The circular also makes a reference to important circulars of CBDT relating to TDS. Likewise, various items on which deduction is permissible as per section 80C are also dealt with in the above-mentioned circular.
A full reading of the circular will surely help in the process of correct computation of salary income and tax deduction at source on the salary income. All those desiring a full reading should visit the website of the Income tax department namely www.incometaxindia.gov.in.
The author is a tax and investment consultant at New Delhi for the last over 35 years. He can be reached at
.
From India, Bahadurgarh
2007-01-08 12:07 Source : Moneycontrol.com
Various guidelines and clarifications have been issued by the Central Board of Direct Taxes in respect of income tax deduction from salary income during the financial year 2006-07. These guidelines are contained in CBDT Circular No. 11 of 2006 dated The guidelines will help the salaried employees in particular as it discusses the various intricate aspects in greater depth. In this article some of the important features of this circular have been discussed which will help in correct computation of salary income and tax deduction on the same.
Method of tax calculation for salary and perquisites
In the opening paragraph the circular starts with the theme of method of tax calculation and provides that income tax is required to be calculated on the basis of the rates given in the Finance Act, 2006 and the tax shall be deducted on average at the time of each payment. No tax will, however, be required to be deducted at source in any case unless the estimated salary income including the value of perquisites, for the financial year 2006-07 exceeds Rs.1,00,000 or Rs.1,35,000 or Rs.1,85,000, as the case may be, depending upon the gender of the employee. With regard to the tax payment on non-monetary perquisites by the employer the circular states that an option has been given to the employer to pay the tax on non-monetary perquisites given to an employee. The employer may, at his option, make payment of tax on such perquisites himself without making any TDS from the salary of the employee. The employer will have to pay such tax at the time when such tax was otherwise deductible, i.e., the time of payment of income chargeable under the head ‘salaries’ to the employee. The income tax on the salary is to be determined at the average of income tax computed on the basis of rate in force for the financial year, on the income chargeable under the head ‘salaries’ including the value of perquisites for which tax has been paid by the employer himself.
TDS in case of change in employment
Nowadays there is a heavy shift of employment. Many employees go on changing their jobs on a regular basis. Where the employee during the year has changed from one employer to another the circular provides for deduction of tax at source by such employer (as the taxpayer may choose) from the aggregate salary of the employee who is or has been in receipt of salary from more than one employer. The employee is now required to furnish to the present/chosen employer details of the income under the head ‘salaries’ due or received from the former/other employer and also tax deducted at source there from, in writing and duly verified by him and by the former/other employer. The present/chosen employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer).
Claiming salary relief
For claiming relief when salary is paid in arrear or advance the circular provides for relief on submission of Form No. 10E.
Setting off loss against salary
If the employee claims a loss under the head ‘income from house property’ in respect of a self occupied residential house property then the employee should provide the details of such loss to the employer in a simple statement. These particulars earlier were required to be given in form 12C but now the said Form 12C has been omitted from the income tax rules, hence the particulars to this effect can be given in a simple statement. Similarly, in respect of any other income on which the employee desires tax deduction at source the particulars of the same should be submitted to the employer in the said statement.
The issue relating to claim of deduction on borrowed capital for computation of income from house property is really very important for most employees. The circular states that for the purpose of computing income/loss under the head ‘income from house property’ in respect of a self-occupied residential house, a normal deduction of Rs.30,000 is allowable in respect of interest on borrowed capital. However, a deduction on account of interest up to a maximum limit of Rs.1,50,000 is available if such loan has been taken on or after April 1, 1999, for constructing or acquiring the residential house and the construction or acquisition of the residential unit out of such loan has been completed within three years from the end of the financial year in which capital was borrowed. Such higher deduction is not allowable in respect of interest on capital borrowed for the purposes of repairs or renovation of an existing residential house. To claim the higher deduction in respect of interest up to Rs,1,50,000, the employee should furnish a certificate from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by such employee for the purpose of construction or acquisition of the residential house or for conversion of a part or the whole of the capital borrowed, which remains to be repaid as a new loan. The essential conditions necessary for availing of higher deduction of interest of Rs,1,50,000 are that the amount of capital must have been borrowed on or after April 1, 1999, and the acquisition or construction of residential house must have been completed within three years from the end of the financial year in which capital was borrowed. There is no stipulation regarding the date of commencement of construction. Consequently, the construction of the residential house could have commenced before April 1, 1999, but, as long as its construction/acquisition is completed within three years, from the end of the financial year in which capital was borrowed the higher deduction would be available in respect of the capital borrowed after April 1, 1999. It may also be noted that there is no stipulation regarding the construction/acquisition of the residential unit being entirely financed by capital borrowed on or after April 1, 1999. The loan taken prior to April 1, 1999, will carry deduction of interest up to Rs.30,000 only. However, in any case the total amount of deduction of interest on borrowed capital will not exceed Rs.1, 50,000 in a year.
Adjustment of excess or shortfall of TDS
It is clearly mentioned in the said circular that the provisions of sub-section (3) of section 192 allow the deductor to make adjustments for any excess or shortfall in the deduction of tax already made during the financial year, in subsequent deductions for that employee within that financial year itself. The procedural formalities relating to deposit of tax deducted and issue of certificate for TDS on salary income so also the aspects connected with penalty for failure to deposit tax deducted have been very clearly mentioned in the circular. Further the circular states that quoting of TAN and PAN is mandatory. As per law it is obligatory for persons deducting tax at source to quote PAN of the persons from whose income the tax has been deducted. Various obligations relating to quarterly statement of TDS etc., have been outlined in the circular. With regard to TDS on Income from Pension the circular states that the pensioners who receive their pension from a nationalized bank, the instructions contained in this circular shall apply in the same manner as they apply to salary-income.
The following incomes would be chargeable under the head Salaries on which the tax should be deducted at source:
(a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not.
(b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him.
(c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income tax for any earlier previous year.
Various perquisites on which tax is to be paid by the employees have also been enumerated in this circular. Similarly, the various tax deductions have been analysed at one place, which can be taken advantage of by the tax payers. The circular states that the drawing and disbursing officers should satisfy themselves about the actual deposits/subscriptions/payments made by the employees, by calling for such particulars/information, as they deem necessary before allowing the deductions. In case the DDO is not satisfied about the genuineness of the employee’s claim regarding any deposit/subscription/payment made by the employee, he should not allow the same, and the employee would be free to claim the deduction/rebate on such amount by filing his return of income and furnishing the necessary proof, etc., therewith, to the satisfaction of the Assessing Officer.
House Rent Allowance
While discussing the aspects relating to house rent allowance the circular states that it is to be noted that only the expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee subject to the limits laid down in rule 2A, qualifies for exemption from income tax. Thus, house rent allowance granted to an employee who is residing in a house/flat owned by him is not exempt from income tax. The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of rent before excluding the house rent allowance or any portion thereof from the total income of the employee. Though incurring actual expenditure on payment of rent is a pre-requisite for claiming deduction under section 10(13A), it has been decided by CBDT as an administrative measure that salaried employees drawing house rent allowance up to Rs.3,000 per month will be exempted from production of rent receipt. It may, however, be noted that this concession is only for the purpose of tax-deduction at source, and, in the regular assessment of the employee, the Assessing Officer will be free to make such enquiry as he deems fit for the purpose of satisfying himself that the employee has incurred actual expenditure on payment of rent.
The circular also makes a reference to important circulars of CBDT relating to TDS. Likewise, various items on which deduction is permissible as per section 80C are also dealt with in the above-mentioned circular.
A full reading of the circular will surely help in the process of correct computation of salary income and tax deduction at source on the salary income. All those desiring a full reading should visit the website of the Income tax department namely www.incometaxindia.gov.in.
The author is a tax and investment consultant at New Delhi for the last over 35 years. He can be reached at
From India, Bahadurgarh
Community Support and Knowledge-base on business, career and organisational prospects and issues - Register and Log In to CiteHR and post your query, download formats and be part of a fostered community of professionals.
A step-by-step guide- Income tax return (ITR)-.pdf
Income Tax Calculator.xls