A platform to honour honest taxpayers will strengthen compliance and broaden tax base

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Prime Minister Narendra Modi announced several tax measures on the eve of India’s Independence Day last week honouring the honest tax-paying citizen.

You will now have to file your income-tax (IT) return or pay higher percentage of tax deduction at source if you make certain spends in a year.

 If you spend Rs 20,000 a year as hotel expenses, property tax or even a health insurance premium, then your transactions would be reported. Similarly, if your annual rent exceeds Rs 40,000, life insurance premium is at least Rs 50,000 or electricity bills of Rs 1 lakh or more during a financial year, then you would be answerable to the taxman either via notices or through mandatory filing of returns.

 

The motive of the move is to check whether your spending is in line with the income you actually disclose in your return.

The Government has been shunting all doors to not only reduce the number of all cash transactions, but also increase the number of returns filed. The new move to collect spending data is another tool in the armoury to curb tax evasion.

Are transactions tracked currently?

The existing income tax rules mandate financial institutions such as banks, mutual fund houses, share registrar and transfer agents,sub-registrars to report high value transactions exceeding a specified limit during a financial year to the Income Tax Department.

So, a bank has to report details of every account holder who makes cash deposits of more than Rs 10 lakh in a year in a savings account or makes a payment of more than Rs 2 lakh from his credit card in a year. Similarly, asset management companies are required to report details of all the investors who invest more than Rs 2 lakh in a single mutual fund scheme. Now not only your investments and financial transactions, but also your specific spends will be tracked.

Do I have to inform the government of all my spends?

No. You do not have to go out of your way to inform the government or anyone, unless asked for in the tax return forms. Your purchases and expenses beyond a threshold will be mentioned in the returns of the hotel, electronic goods seller, artist, school, ceramic supplier or the Registrar in the case of property purchase, apart from banks, mutual fund houses, life and general insurance companies.

The details mapped to you would be reflected in your individual tax statement or Form 26AS. This form would be available on your income-tax website login.

The moment your spends in any of the high-spend categories mentioned, exceed the respective threshold limits, your Form 26AS would capture it. In other words, you have to file your tax returns.

Non-filing of ITR may have severe consequences for a person, who is otherwise required to file an ITR. Apart from attracting interest, late fee and penalty, wilful non-filing of ITR may also attract criminal prosecution.

The new move has been part of the government’s move to widen the tax net and get more and more people to file their income tax returns. A total of about 55 lakh or 80 per cent of the total returns are filed by people having an income of up to Rs 5 lakh, as per the Central Board of Direct Tax’s numbers as of July 31, 2020.

Only 5,066 individuals, who have an income above Rs 1 crore file returns, accounting for 0.73 per cent of the total individual tax returns.

Taxpayers would not need to mention their high-value transactions in their income tax returns, said officials in the know of the matter, but added that broadening the scope of reporting financial transactions by third parties had become vital since taxation was moving towards a faceless approach.

It’s clarified that only third parties would report high-value transactions to the income tax department as per the Income Tax Act. The information would be used to identify people who are not paying up due taxes, and not for examining affairs of honest taxpayers.

“The information will be used to identify those who are either not filing the returns or the income disclosed in the returns are not proportionate to the pattern of expenditure reported in the statement of financial transactions (SFTs),” the official said.

Data analytics and artificial intelligence will be used for this, instead of manual intervention.

Terming the method as most ‘non-intrusive’, the official said it would be used for identifying those who spend big money on business class air travel, foreign travel and expensive hotels or send their children to expensive schools, but do not pay taxes, claiming their income to be under Rs 2.5 lakh a year.

Prime Minister Narendra Modi flagged this very issue on Thursday, and asked people to pay their fair share of taxes, given that the country’s tax base was relatively small.

“Only 1.5 crore people pay taxes in a country of 130 crores,” he pointed out while launching a taxpayer’s charter and faceless assessment, aimed at improving transparency in tax administration.

“No doubt, the third-party reporting of high-value transactions made by such non-filers would allow the department to nudge such persons to file their returns and pay their due tax,” the official said.

File revised tax returns after rectifying errors

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Most of us collate all information relating to our annual income, investments and tax deducted at source (TDS) before proceeding to file our income tax returns. However, the income tax filing process is a fairly comprehensive exercise. We might miss disclosing an income due to oversight, or claim an exemption or deduction that is not due. What are the options available to us if we make a mistake while filing returns?

We may make an error due to insufficient information or mis-match between Form 16 / Form 16 A and Form 26 AS or any other reason. Errors may also occur in our calculation. The income tax law allows us to file a revised return, correcting the omission or mistake made by us in the original return.

Filing a revised return

You can file a revised return at any time before the end of the assessment year, or before completion of the assessment, whichever is earlier.

For example, for the AY 2019-20, you can file a revised return till 31 March 2020. However, if your assessment is concluded before that date, you cannot file a revised return after completion of your assessment. An income-tax assessment is made through a notice issued by the assessing officer where your income and taxes are determined through assessment proceedings. In some situations this assessment may be completed before the end of the assessment year. If this is the case, you can no longer revise your return.

The revised return has to be filed in the same manner as an original return. While filing, a taxpayer has to choose the option: ‘Revised u/s 139(5)’. A taxpayer has to quote the acknowledgement number and date of filing of the original return while filing the revised return. The revised return substitutes the original return.

You may have filed an original return within the due date, or you may have filed after the due date. A return filed after the due date is called a ‘belated return’. You can revise both—a return filed within the due date or a belated one. The time limit for revising is the same for both as discussed above, i.e., before the end of the assessment year or before completion of assessment, whichever is earlier.

You can revise your income tax return any number of times. However, you are required to mention the acknowledgement number of the original return filed. You must note that ‘revised return’ is an opportunity for revision allowed by the income tax department. Hence, one must not misuse it and revise a return only in the case of a mistake or omission in the original return filed. If you are making errors with revisions, it’s in your interest to seek professional help for your return filing.

As is done with an original return, do remember to e-verify your ‘revised return’ as well. Your ‘revised return’ would not be valid if the same is not e-verified. You can e-verify the ‘revised return’ using an OTP (one-time password) based on Aadhaar or net banking or EVC (electronic verification code). You can also send a signed copy of the ITR V to the Centralized Processing Centre, Bengaluru, within 120 days of filing the ‘revised return’.

CBDT shoots off letter to taxmen, says don’t go overboard on fishing and roving inquiries in wake of demonetisation drive

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The move comes at a time when the tax department’s field formations have apparently been on an overdrive after the demonetisation move brought large chunks of supposedly tax-evaded cash into the banking system.

The Central Board of Direct Taxes (CBDT) has sent a missive to all assessing officers (AOs) to stick to protocol while pursuing cases of “limited scrutiny” and not resort to “fishing and roving inquiries” in such cases.

The Central Board of Direct Taxes (CBDT) has sent a missive to all assessing officers (AOs) to stick to protocol while pursuing cases of “limited scrutiny” and not resort to “fishing and roving inquiries” in such cases. The move comes at a time when the tax department’s field formations have apparently been on an overdrive after the demonetisation move brought large chunks of supposedly tax-evaded cash into the banking system. The department selects cases of “limited scrutiny” — which restricts probe into a single aspect rather than a complete appraisal of tax liability — through Computer Aided Scrutiny Selection (CASS). The data mined include annual information reports and 26AS, which includes tax payment/TDS history. In its latest direction to the assessing officers (AOs), the board said it has come across instances where AOs have ventured beyond their jurisdiction while making assessments in ‘limited scrutiny’ cases by initiating inquiries on new issues without following the due procedure.

“These instances have been viewed very seriously by the CBDT and in one case, the Central Inspection Team of CBDT was tasked with examination of assessment records on receipt of allegations of several irregularities,” the letter said. The CBDT in fact suspended the officer concerned after it was found that there was no reason recorded for expanding the scope of limited scrutiny. Violating standard operating procedure, the officer had not sought approval from principal commissioner for converting limited scrutiny cases into a complete scrutiny case. Moreover, the AO hadn’t maintained the order sheet properly, which gave rise to strong suspicion of mala fide intentions. The purpose of introducing ‘limited scrutiny’ was to curb overarching powers of AOs and improve ease of paying taxes. The CBDT has previously issued instruction to AOs to confine the questionnaire to the specific issues and complete the case expeditiously in a limited number of hearings.

The CBDT reiterated that AOs must maintain “order-sheet” properly by ensuring that the minutes of the hearing in a case are entered along with relevant date. Further, it said that the order-sheet must have entries for each posting, hearing and seeking and granting of adjournments. Order-sheet is meant to chronicle the progress of an assessment case by the concerned official. “Suspension of undisciplined officers clearly conveys the message that the government aims to make India’s taxation regime transparent, non-adversarial and taxpayer friendly. But the established fact is that real picture is drawn from the enforcement and not policy formulation. Hoping that the tax authorities follow the instructions diligently going forward and end the era a tax terrorism,” Rakesh Nangia, managing partner at Nangia & Co said.

Source: Financial Express

ITR filing date extended to October 31

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Tax payers who were supposed to file their income tax returns by September 30 now have some more time on their hands. The government has extended the deadline to file income tax returns for such tax payers until October 31.

“The ‘due-date’ for filing Income Tax Returns and various reports of audit prescribed under the Income-tax Act,1961 has been extended from 30th September, 2017 to 31st October, 2017 for all taxpayers who were liable to file their Income Tax Returns by 30th September, 2017,” Ministry of Finance said.

This time tax payers will have to quote their 12-digit Aadhaar number or the 28-digit Aadhaar enrolment number while filing the income tax return.

You will have to keep the Form 16, which you got from their employer handy. If you don’t have it, get it asap. Download the Form 26AS from the Income Tax e-filing website. Form 26AS is a consolidated tax statement which states tax credit statement of all taxes received by the Income Tax Department against your PAN number. You will need it to tally with your Form 16.

Availability of the detail of bank accounts in which the refund is to be credited is a precondition for direct credit of refund in bank accounts. Refund generated on processing of return of income is currently credited directly to the bank accounts of the tax-payers. Non-residents, who are claiming refund but do not have bank accounts in India may furnish details of one foreign accounts in ITR for issuance of refund.

Bank accounts details

A tax payer is also required to disclose his/her bank account number along with the IFSC code. However, dormant accounts which have been in use for the past three years or more need not to be mentioned.

Mandatory disclosure

According to the Income Tax Department now, tax payers have to disclose information of cash deposited in their bank account aggregating to Rs 2 lakh from November 11 to 30 December, 2016.

Ensure that ITR is compliant with amount deposited in bank accounts during the period of demonetisation

Besides that, if any assessee has any unexplained income or investments, he has to report such unexplained income in the new ITR forms and such amount will be taxable at the tax rate of 60 percent plus surcharge and cess.

Tax deductions

  • If you are claiming tax deductions under 80C, you should keep the following details handy:
  • Investment details (eg: LIC, PPF, NSC)
  • Home loan
  • LTA
  • Medical

Consequences of Late filing of Return

According to ClearTax, if there are any taxes which are unpaid, penal interest at 1 per cent per month or part thereof will be charged till the date of payment of taxes .Also Penalty of Rs 5,000 may be charged. The penalty is not levied in all cases and depends upon the circumstances of the case.

For returns of FY 2017-18 and onwards, penalty of Rs 5,000 will be charged for returns filed after due date but before 31st December. If returns are filed after 31st December, a penalty of Rs 10,000 shall apply. However, penalty will be Rs 1,000 for those with income upto Rs 5 lakh.
Who has to file?

Every person whose gross total income exceeds the taxable limit must file an Income Tax Return (ITR)

Who has to file?

Every person whose gross total income exceeds the taxable limit must file an Income Tax Return (ITR)

Who has to e-file?

  • Individuals & HUF having total income exceeding Rs 5 lakh or claiming any refund in the return (excluding individuals of the age of 80 years or more who are furnishing return in Form no. ITR-1 or ITR-2).
  • Individual or HUF, being a resident other than not ordinarily resident, having any foreign asset/income or claiming any foreign tax relief.
  • Persons filing ITR in Form no. 3, 4, 5 or 7.

 

Source: Business Today

 

 

Today is the last day to file Income tax return, know easy steps if you haven’t filed yet

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The last date for filing income-tax returns was extended to August 5, and it ends today. Tax returns for 2015-16 (assessment year 2016-17) were originally to be filed by July 31. But in view of the day-long strike at public sector banks, the deadline was extended to August 5. However, the deadline for Jammu and Kashmir will be August 31 in view of the ongoing turmoil in the state.

The return is mandatory if your taxable income is above Rs 2,50,000.

The Revenue Authorities have introduced new reporting requirements for FY 2015-16 for Assets and Liabilities for individuals with income above Rs 50,00,000. In case of this, the individual has to disclose the cost value of all the assets above the specified amount, in the tax form, as well as disclose the debts associated with these assets- land, building, cash-in-hand, jewellery, bullion, vehicles, yachts, boats and any aircraft owned. It is advisable that you retain the purchase receipt of any of these assets.

It has almost become a ritual for people to delay filing their income tax returns till the last date and for the government to extend the same due to “popular demand”. However, the long queues that used to be another annual feature of the tax filing week has become a thing of the past due to the growing popularity of income tax e-filing.

The incometaxindiaefiling.gov.in has made it really easy for people to file their returns from the comfort of their homes.

If you have not yet filled you returns, here are some easy and essential steps to do it before the time ends.

Step 1: Select the right form: You have to select the form based on your source of incomes. So ITR-1 is for salaried individuals whose get a salary or a pension along with income from a house/property or from other sources, things like lottery. This is not for those with multiple houses/properties, income from winning a lottery, agricultural income of above Rs 5000, income from business. Tax payers filing for double tax relief should also not use this.

ITR-2A, introduced this year, is for those individuals who have income from more than one house property. ITR-2 can be used by individuals with no income from business / profession. ITR-3 is for individuals partnering in a firm, but not for those earning income from a proprietorship form. ITR-4 is for those individual earning income from a proprietorship firm. ITR-5 and 6 are for use by companies alone.

Step 2: Get your Form 16 ready: This form given by your employer shows your saving as well as the tax deducted. There will be multiple forms if you have changed jobs over the assessment year.

Step 3: Additional documents: You might need your bank statements, interest certificates, and your housing loan certificate (in case of housing loan).

Step 4: Download Form 26AS from the e-filing website to see which taxes are deducted at source

Step 5: Filing/uploading: Individuals with over Rs 5,00,000 income have to e-file their tax returns. You will get an automatic acknowledgement once the return is successfully uploaded. Verify this and submit the acknowledgement online, ideally with e-verification. This completes the process of filing your income-tax return.

Source: http://indianexpress.com/article/business/business-others/income-tax-return-filling-last-date-steps-to-file-it-2955207/