A Review on – Filing Income Tax Return

Purview


Is earning the salary/Income is net of tax or we have to pay tax on it. The answer to this question is obviously “Yes”. So now the question arises about how to pay the tax or show the income to government so that to decide the amount of tax to pay. Let us see its different consequences, terms, methods, benefits and procedures that what i have faced while filing a return.

Why it is necessary to file income tax return?


I found my answer to the question as it is because of The Central Government has been empowered by Entry 82 of the Union List of Schedule VII of the Constitution of India to levy tax on all income other than agricultural income (subject to Section 10(1)) The Income Tax Law comprises The Income Tax Act 1961, Income Tax Rules 1962, Notifications and Circulars issued by Central Board of Direct Taxes (CBDT), Annual Finance Acts and Judicial pronouncements by Supreme Court and High Courts.

What is the use of Income Tax? Why it is deducted?


Income tax is a key source of funds that the government uses to fund its activities and serve the public.

The Income Tax Department is the biggest revenue mobilizer for the Government. The total tax revenues of the Central Government increased from 1392.26 billion in 1997-98 to 5889.09 billion in 2007-08 and 247639 (budget) in 2013-14.

When such a huge source of income is generated by the way of income tax then, why should government would not collect tax.

What is Income Tax Return?


Before moving to its procedure and its terms, it is quite necessary to know about the meaning of Return of Income. Basically, it is the format in which the assessee furnishes information as to his total income and tax payable. The format for filing of returns by different assessee is notified by the CBDT. The particulars of income earned under different heads (like income under Salary, Business Profession, House Property, Capital Gain and other sources).Gross total income, deductions from gross total income, total income and tax payable by the assessee are generally required to be furnished in a return of income.

Who should have to file Income tax Return?


Before filing income tax return, it’s necessary to check the applicability status or who needs to file such return. As per Section 139(1), every company and partnership firm should file Return of Income irrespectiive of Income or loss.

Any other person is required to file Return of Income if total Income is exceeding the exemption limit.

Benefits:


Other reasons for filing the returns of income within time If a refund is due after adjustment of prepaid taxes, it is necessary to file the Income Tax Return to get the refund from the Income Tax Department.

  • Bank Loans: Further, the return is a declaration of your income and it will be extremely helpful when you are applying for a loan from bank. Before granting the loan, banks want to know your financial capacity and your income details as shown by you in income tax returns.
  • If No Tax is due: Interest is calculated on the amount of tax payable after adjustment of pre-paid taxes like advance tax, TDS etc. So, if there is no tax payable on the basis of the Income declared in the Tax Return, there is no liability for the payment of interest.
  • You don’t get the benefit of Carry Forward of Losses if you don’t file on time Under income tax law, if you have sustained a Business loss or loss under the head “Capital Gains”, you can carry forward the loss ONLY if you file the Income Tax Return by the due date.
  • Therefore, if you have sustained a loss, you must file your Income Tax Return in time if you want to carry forward the loss for future adjustment with your Income.

Contents:


  1. Slab Rates
  2. Due Dates
  3. Format for filing Income Tax Return.
  4. Interest for default in furnishing return of income
  5. Penalty
  6. Registration for the first time to file Income Tax Return:
  7. How to Upload returns
  8. Acknowledgment receipt
  9. Option to furnish return of income to employer (Section 139 (1A)
  10. Income- tax return through computer readable media (Section 139 (1B)
  11. Specified Class or Classes of persons to be exempt from filing Return of Income (Section 139(1C)
  12. Return of Loss (139(3)
  13. Belated Return (Section 139 (4)
  14. Return of Income of Charitable Trust and Institutions (Section 139 (4a)
  15. Return of income of political parties (Section 139 (4B)
  16. Mandatory filing of returns by Scientific Research Associations, News Agency, Trade Unions, Etc. (Section 139(4C))
  17. Mandatory filing of returns by Universities, Colleges etc. (Section 139(4D)
  18. Revised Return (139(5)
  19. Particulars to be furnished with the return (Section 139 (6)
  20. Particulars to be furnished with return of income in the case of an assessee engaged in business or profession (Section 139 (6A)
  21. Defective Return (Section 139 (9)
1. Slab Rates:Go To Top

Usually, Slab rates are different for each years. This is because of increase in country’s GDP, so the slab rate to pay the income tax by the individuals also gets changed to every Financial Year/Assessment Year:

2. Due Dates:Go To Top

Now lets see the Due dates for filing of Return of Income:

  1. 31st July, 20XX: for the person whose account need not to be audited.
  2. 30th Sept, 20XX: for the person, firm or company whose account to be audit
3. Format for filing Income Tax ReturnGo To Top

As there are different source of income and catogories of Assessee, its too trouble to show them in one format. To show them in a clear vision there are different forms:

As the Central Board of Direct Taxes has prescribed new return of income forms for the assessment 08-09 onwards, as shown in the table below:

FormCatogory of Income/Assessee
ITR-1Individuals having salary, pension, family pension or interest income.
 ITR-2Individuals and Hindu undivided family (HUFs) not having income from business or profession.
ITR-3Individuals and HUFs who is a partner in partnership firm but does not carry on a proprietary business or profession.
ITR-4Individuals and HUF’s carrying on a proprietary business or profession
ITR-5Partnership firms, Association of Persons (AOP) and Body of Individuals (BOI)
ITR-6Companies other than companies claiming exemption under section 11.
ITR-7Persons including companies which are charitable or religious trust, political party, scientific research association, news agency, hospital, trade union, university, college or other institution specified in sub-section (4A), (4B), (4C) and (4D) of section 139 of the act.
ITR-8Person not liable to file return of income but are liable to file fringe benefits.
ITR-VWhere the data of the return of income or Fringe benefits in Forms ITR-1, ITR-2, ITR-3, ITR-4 ITR-5, ITR-6 &ITR-8 is transmitted electronically without digital signature.
ITR-4SForm is a Presumptive Income Tax Return The Form is required to be filled out and submitted by those who are eligible to use it under the Income Tax Act, 1961, and the Income Tax Rules, 1962.
4. Interest for default in furnishing return of incomeGo To Top

Interest under section 234A is attracted for failure to file a return of income on or before the due date mentioned above i.e. interest is payable where an assesse furnishes the return of income after the due date or does not furnish the returnof income.

Simple interest @1% per month or part of the monthis payable for the period commencing from the date immediately following the due date and ending on the following dates

CircumstancesEnding on the following dates
Where the return is furnished after due dateThe date of furnishing of the return
Where no return is furnishedThe date of completion of assessment

The interest has to be calculated on the amount of tax on total income as determined under section 143 (1) or on regular assessment as reduced by the advance tax paid and any tax deducted or collected at source.

 5. PenaltyGo To Top

Further, if a person has failed to file the Income Tax Return by 31st March 2014 and the tax payable after adjustment of advance tax and TDS exceeds Rs. 3000, he may be prosecuted for imprisonment also. However, this law is used in practice very rarely.

After a small introduction on the Return of Income now lets practice on how does it gets done.


Now lets analyze some hurdles faced in day to day business. Generally, the Individuals who poses salary income fumbles about the Return of Income. For them the major issue is to obtain Form-16 from the employer. So they gets trouble about the same. As during the whole year the TDS use to deduct from their salary income and submitted to TDS department. Hence, the same statement is being re-stated in the Form-16. So, its necessary to obtain the Form-16 from the employer so to get inform about the deducted amount from the salary and whether any refund can be claimed from the same or not. Usually, it is found that Form-16 is being obtained from the employer in the month of June. So, it is advised by the Income Tax Department to obtain the Form-16 from their employer.

6. Registration for the first time to file Income Tax Return:Go To Top

Now after obtaining the Form-16 by the salary employees and for all other assesses who gets their accounts audited or all those assesses who wants to show their income in different heads, then first of all they have to get register before filling the return with the Income tax portal.

There the assesses has to get register by

  • Go to https://incometaxindiaefiling.gov.in/
  • Click on as a New User (Register Now),
  • There by filling the basic information like Name, address, Pan, Bank account details etc.
  • Once you have your basic details, you will automatically get register and your password will be sent to your email.
  • After the confirmation from the said mail, you can start our activity then.
  • It is generally advised to keep your password secret.
7. How to Upload returnsGo To Top

On the Income Tax portal,

  • Click on Upload Return Icon.
  • Fill your Pan No., Password and your Date of Birth for confirmation, then press Submit
  • Select the ITR Form as suggested below.
  •  Select the Assessment Year.
  • Attach the XML file ( only when you file return by downloading ITR portal)
  • Digital Sign (http://www.incometaxindiapr.gov.in/incometaxindiacr/faq.jsp?p=faq_eFiling_Digital%20Signature.html
  • Then click submit.
  • Once your income tax is submitted you will get receive a Acknowledgement in your email address. Keep it for your future reference.
8. AcknowledgmentGo To Top

When you e-file your Income Tax Return, the Income Tax department sends your ITR-V to the email address you selected within 2-3 days of e-filing.

Three things to keep in mind:

  1. If you file close to the deadline (i.e. July 31st), they will take more time to send your ITR-V. Income Tax Department took around 7-8 days to send out the ITR-V in many cases.
  2. Sometimes the email containing the ITR-V was found in the SPAM folder of your email provider. The email is sent out to you by the I-T department from do not reply@incometaxindiaefiling.gov.in Search your spam folder.
  3. The Income Tax Department makes the ITR-V available on their official portal. www.incometaxindiaefiling.gov.in
    1. You will have to login to the government website. The username is your PAN number.
    2. Once you login to the website, you will see the returns submitted by you
    3. Click on the acknowledgement number and a popup will open.
    4. Click on ITR-V / Acknowledgement to download your ITR-V
9. Option to furnish return of income to employer (Section 139 (1A)Go To Top

This section gives an option to a person, being an individual who is in receipt of income chargeable under the head “salaries”, to furnish a return of his income for any previous year to his employer, in accordance with such scheme as may be notified by the CBDT and subject to such conditions as may be specified therein.

Such employer shall furnish all returns of income received by him on or before the due date, in such form (including on a floppy, disklette, magnetic cartridge tape, CD-ROM or any other computer readable media) and manner as may be specified in that scheme.

In such a case, any employee who has filed a return of his income to his employer shall be deemed to have furnished a return of income under sub section (1).

10. Income- tax return through computer readable media (Section 139 (1B)Go To Top

This sub-section enables the taxpayer to file his return of income in computer readable media, without interface with the department.

It provides an option to a person (both corporate and non- corporate) required to furnish a return of his income.

Such employer shall furnish all returns of income received by him on or before the due date, in such form (including on a floppy, disklette, magnetic cartridge tape, CD-ROM or any other computer readable media) and manner as may be specified in that scheme.

11. Specified Class or Classes of persons to be exempt from filing Return of Income (Section 139(1C)Go To Top

  1. Under section 139(1), every person has to furnish a return of his income on or before the due date, if his total income exceeds the basic exemption limit.
  2. For reducing the compliance burden of small taxpayers, the central government has been empowered to notify the class or classes of persons who will be exempted from the requirement of filing of return of income, subject to satisfying the prescribed conditions.
  3. Every notification issued under section 139(1C) shall, as soon as may be after its issue, be laid before each House of Parliament while it is in session, for a total period of thirty days. If both Houses agree in making any modification in the notification, the notification will thereafter have effect only in such modified form. If both Houses agree that the notification should not be issued, the notification shall thereafter have no affect.
12. Return of Loss (139(3)

This section requires the assessee to file a return of loss in the same manner as in the case of return of income within the time allowed under section 139(1).

Under section 80, an assessee cannot carry forward or set off his loss against income in the same or subsequent year unless he has filed a return of loss in accordance with the provision of section 139 (3)

A return of loss has to be filed by the assessee in his own interest and the non- receipt of a notice from the Assessing officer requiring him to file the return cannot be a valid excuse under any circumstances for the non- filing of such return.

13. Belated Return (Section 139 (4)Go To Top

Any person who has not furnished to return within the time allowed to him under section 139(1) or within the time allowed under a notice issued under section 142(1) may furnish the return for any previous year at any time-

  1. Before the expiry of one year from the end of the relevant assessment year or
  2. Before the completion of the assessment.

Whichever is earlier.

# Belated return cannot be revised.

14. Return of Income of Charitable Trust and Institutions (Section 139 (4a)Go To Top

  • Every person in receipt of income
  • Derived from property held under a trust or any other legal obligation wholly or partly for charitable or religious purpose ; or
  • By way of voluntary contributions on behalf of such trust or institution

Must furnish a return of income if the total income in respect of which he is assessable as a representative assessee (computed before allowing any exemption under section 11 and 12) exceeds the basic exemption limit.

15. Return of income of political parties (Section 139 (4B)Go To Top

Under this section, a political party is required to file a return of income if, before claiming exemption under section 13A, the party has taxable income.

The return must be filed in the prescribed form and verified in the prescribed manner setting forth such other particulars as may be prescribed by the CBDT.

16. Mandatory filing of returns by Scientific Research Associations, News Agency, Trade Unions, Etc. (Section 139(4C))Go To Top

It is mandatory for the following institutions/ associations etc. to file the return of income if their total income without giving effect to exemption under section 10, exceeds the basic exemption limit

17. Mandatory filing of returns by Universities, Colleges etc. (Section 139(4D)Go To Top

It will be mandatory for every university, college or other institution referred to in clause(ii) and clause(iii) of section 35(1), which is not required to furnish its return of income or loss under any other provision of section 139, to furnish its return in respect of its income or loss in every previous year.

18. Revised Return (139(5)Go To Top

If any person having furnished a return under section 139 (1) or in pursuance of a notice issued under section 142 (1), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before completion of assessment, whichever is earlier.

19. Particulars to be furnished with the return (Section 139 (6))Go To Top

The prescribed form of the return shall, in certain specified cases, require the assesse to furnish the particulars of –

  1. Income exempt from tax
  2. Assets of the prescribed nature and value and belonging to him
  3. His bank account and credit card held by him
  4. Expenditure exceeding the prescribed limits incurred by him under prescribed heads.
  5. Such other outgoings as may be prescribed.
20. Particulars to be furnished with return of income in the case of an assessee engaged in business or profession (Section 139 (6A)Go To Top

The prescribed form of the return shall, in the case of an assessee engaged in any business or profession also require him to furnish:

  1. The report of any audit referred to in section 44AB.
  2. The particulars of the location and style of the principal place where he carries on the business or profession and all the branches thereof.
  3. The names and addresses of his partners, if any, insuch business or profession.
  4. If he is a member of an association or body of individuals,
  5. The names of the other members of the association or the body of individuals, and
  6. The extent of the share of the assessee and the shares of all such partners or members, as the case may be, in the profits of the business or profession.
21. Defective Return (Section 139 (9)Go To Top

Where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assess and give him an opportunity to rectify the defect within a period of 15 days from the date of such intimation. The Assessing officer has the discretion to extend the time period beyond 15 days, on an application made by the assessee.

If the defect is not rectified within the period of 15 days or such further extended period, then the return would be treated as an invalid return. The consequential effect would be the same as if the assessee had failed to furnish the return.

Tax Planning Tips:


For Fake return, which sorts of business or income can be shown up

There is a general query of those person who just want to file their return to show their income on provisional basis or necessary to submit their return then they can show their income on the ITR-4 under the heading “Others”. Anyone can show that income under any running business or profession like running Coaching, Shops, any private household business, any commercial activities etc.


Other FAQ’s as per Income Tax


At Conclusion:

In the day to day business we usually focus on how to increase our source on income. But it is also the duty of assessee to show all the source of income to the government in their Return of Income at the end of every assessment year/previous year. If it is not done within due date then they have to face several penalty and interest rates. So its the duty of every assessee to file return of income so to be a responsible citizen of the country.


References:

1. Study Material, ICAI-Final(Course)

Published by

Shushant ( ICAI Final )

Shushant is a Chartered Accountant student at Institute of Chartered Accountants of India. He is also a Student of Company Secretary at Institute Of Company Secretaries of India. He is a administrator of this site . In his spare time he hang out with his friends and discuss about the current issues in market. You can find his latest blog posts at www.enrollmyexperience.com and at his facebook profile.

Leave a Reply