Advocate Dhawal Jain

The ITR SAGA – The Who, when and what of the Annual Disclosure Exercise

Income tax returns are the most imaginative fiction being written today. ~Herman Wouk (Pulitzer Prize-winning American author)

“Taxes: Of life’s two certainties, the only one for which you can get an automatic extension. ~Author Unknown”

“Today, it takes more brains and effort to make out the income-tax form than it does to make the income. ~Alfred E. Neuman ( the fictitious mascot and cover boy of Mad, an American humor magazine)”

It’s the so called “Season” for the practicing chartered accountants, Tax Return preparers, consultants and whoever gets their Income-tax returns filed. July is ideally the season where it’s raining taxes in India but this year owing to back and forth in the Income-tax Returns (ITRs) the scheduled due date has now been extended to August 31, 2015. Relief on that front for non-audited tax payers!!!

THE NEW ITR FOR FINANCIAL YEAR 2014-15 (ASSESSMENT YEAR (2015-16) – WHAT DO THEY WANT?

The Ministry of Finance (‘MOF’) through the Central Board for Direct Taxes (‘CBDT’) vide its notification No. 41/2015 dated April 15, 2015 amended Rule 12 and new ITR forms 1, 2 and 4S were notified for AY 2015-16.

These forms were introduced with a view to enhance simplification and information disclosures from the assessees. The forms required extensive disclosures such as bank account disclosures held during the year including dormant accounts, details of foreign trips including number of visits and sums expended from assessee’s own sources . Aadhaar has, like in other essential services, crawled into the Income-tax Returns also.

For the ease and convenience and piling grievances of sending the e-filed acknowledgments to CPC, Bangalore the CBDT announced that assessees e-filing their returns on the income-tax website would no longer have to send the paper acknowledgement by post as a new Aadhaar-based electronic verification code has been launched to authenticate this document.

This had caused a lot of strife within the tax payers and in pursuance of the various responses received from the stakeholders received, the CBDT has now notified newer forms vide new notification No. 49/2015/F. No. 142/1/2015-TPL dated June 22, 2015.

SO, WHAT’S “NEWER” NOW

Thus, now CBDT has rectified the forms and purportedly made the income-tax returns simple and the draconian levels of disclosures are given away. We take the opportunity to bring before you vide the table below, broadly, the changes made in the new ITRs:

SR. NO. CHANGE NEW CHANGES BROUGHT IN EXTANT PROCEDURES
1. Form ITR 2A For individuals not having income capital gains, business or profession or foreign asset or foreign income individuals/HUFs having income from more than one house property or capital gains were required to file Form ITR 2
2. FOREIGN TRIPS No requirement for disclosure of foreign trips. Only passport number to be provided, if available In earlier notification i.e. 41/2015, disclosures regarding foreign trips were asked. Prior to this notification, no such disclosures were made necessary.
3. DETAILS OF BANK ACCOUNTS Only IFSC code, account number of all current/savings bank accounts which were held at any time during the previous year has to be furnished. Balances of such accounts need not be furnished and details of dormant accounts, not operational during the previous 3 years, are also not to be disclosed.

In earlier notification i.e. 41/2015, disclosures regarding bank accounts including dormant accounts, its holder’s names and balances were required.

Prior to this notification none of these details are required.

4. RETURN TYPE BASED ON EXEMPT INCOME

·         Individuals having exempt income without any ceiling (other than agricultural income exceeding Rs. 5,000) can also file form ITR 1.

·         If the assessee also earns any agricultural income then ITR 2 or ITR 2A must be filed as the case may be.

No such distinction was provided in the earlier returns of income.
5. ELECTRONIC FILING OF RETURN TO CLAIM REFUND Amended Rule 12 makes it mandatory for all taxpayers to e-file their return of income to claim refund of tax from the income-tax department.

 

Upto assessment year 2014-2015, Individuals / HUFs not liable to file return of income electronically could claim their refund by physically filing their ITRs
6. RELIEF FOR SUPER SENIOR CITIZENS Option to file their income-tax return in physical format in cases of claim of refund or where their income exceeds Rs. 5 lacs provided the return is in Form ITR 1 or ITR 2.

 

Extant rules required all taxpayers including the super senior citizens to file the return of income electronically if their total income was exceeding Rs. 5 lacs.
7. RELAXATION IS DISCLOSURE IN ‘SCHEDULE FA’ OF THE INCOME-TAX RETURN. If any individual, not being a citizen of India, enters India for business or employment or student visa and acquires any asset during the previous year in which he was a non-resident, then such assets shall not be required to be reported in “Schedule FA – Details of foreign assets and income”, if and only if no income is derived from that asset during the current previous year. No such relaxation were clarified in the earlier notification i.e. 41/2015 nor vide rules existing before

 KEY CHANGES IN NEW ITR FORMS:

Sr. No. Head of changes Income-tax Returns containing such changes Changes made
1. New Income-tax Return ITR Form 2A (NEW)

 

To be filed by an individual / HUF who does not have:

·         Income from capital gains

·         Income from business or profession

·         Foreign assets / Foreign Income

·         Any claim u/s 90/90A/91

(this form is nearly akin to ITR 2 except it does not ask for information relating capital gains)

2. Details of Bank Accounts ITR 1, 2, 2A and 4S

·         Information relating all bank accounts held during the previous year except dormant accounts (non-operational for more than 3 years)

·         Following details are to be provided in the ITRs:

Ø  IFSC Code:

Ø  Name of Bank:

Ø  Account Number:

Ø  Type of Bank Account:

3. Details of foreign travelling ITRs 2, 2A

· Vide notification no. 49/2015 disclosures about foreign trips, expenditure made on such trips, etc. is not required.

· Passport Number, if available, should be furnished.

4. Reporting of Aadhaar Number ITR 1, 2, 2A and 4S · If Aadhaar number available then the same must be provided.
5. Date of formation of HUF ITR 2, 2A and 4S · Date of formation of HUF is to be provided.
6. Reporting of amount remaining unutilized in capital gains account ITR 2

· As per extant law, any assessee unable to invest in new capital asset to claim exemption u/s 54, etc. can deposit such unutilized sum in capital gains scheme account. Amount of exemption = actual investment in new capital asset + amount deposited in capital gains account before due date of filing return of income.

·         New ITRs require disclosure in respect of amount so deposited in capital gains account scheme.

·         Details required in this respect are:

Ø  Previous year in which asset transferred.

Ø  Section under which exemption claimed

Ø  Year in which new asset acquired.

Ø  Amount utilized out of capital gains account to acquire New asset.

Ø  Amount remaining unutilized in capital gains account scheme OR amount not used for making investment in specified new asset.

7. Return filed pursuant to order of CBDT u/s 119 ITR 1, 2, 2A and 4S

·         If assessee is filing ITR in pursuant to order of CBDT u/s 119(2)(b) then a check-box in the ITR is to be ticked.

·         Ordinarily CBDT extends due date of filing the return in cases of natural calamities or when tax payer faces genuine hardship.

8. Details of Income taxable under Double Taxation Avoidance Agreements (DTAA) ITR 2, 2A

·         If Capital Gain OR Residuary income of any assessee is taxable as per provision of the DTAA, then the following details shall be furnished in the return:

Ø  Name of the Country

Ø  Relevant article of the DTAA

Ø  Rate of tax under DTAA (applicable in case of residuary income)

Ø  Confirmation if TRC has been obtained

Ø  Corresponding section of the Act which prescribes the rate of tax (applicable in case of residuary income)

Ø  Amount of income

· Further to the detailing special tax rate on capital gain or residuary income and tax on such income as per DTAA be disclosed separately in Schedule SI.

9. Advance Pricing Agreement (APA) – Code for filing modified Return withdrawn ITR 2 ·  Per provisions of 92CD – Effect of APA where a person has entered into an APA and prior to the APA such person has filed its Return of Income then such person shall furnish within 3 months from the date of such agreement, a modified return in accordance with APA

·  ITRs notified in April 2015 contained the check box for such APA. Now the same are withdrawn in the New ITRs notified. The same would be available only in ITR 4 as APA is more so related to business income.

10. Details about foreign assets and foreign income ITR 2 ·  Additional disclosures relating to foreign assets and income are provided for. These are extremely detailed and would cover the assets and income sources comprehensively.
11. Agricultural Income ITR 2, 2A ·  Exempt Income schedule requires the following information:

Ø  Gross agricultural receipts

Ø  Expenditure incurred on agriculture

Ø  Unabsorbed agricultural loss of previous 8 Assessment Years

Ø  Net Agricultural Income for the year.

12. Distinction between heavy and light good carriages removed ITR – 4S · From Assessment year 2015-16 presumptive income in respect of good carriages is computed at a uniform rate of Rs. 7,500 per month for any good carriages.
13. Acknowledgment details relating to exempt income-ITR V ITR 1, 2, 2A and 4S · Acknowledgment in form ITR-V will also show exempt income inter-alia agricultural income and other exempt income
14. Concessional tax rate in listed securities ITR 2

· Finance (no. 2) Act, 2014 amended proviso to section 112 to provide that the concessional rate of tax of 10% shall be available only for long-term capital gain arising from transfer of listed securities and zero coupon bonds.

· ITR is suitably amended to incorporate such amendment.

15. Sale of units of business trust ITR 2

· Amendment is made to section 10(38) and 111A to provide that long-term capital gains arising from the transfer of unit of business trust on which STT is paid to be exempt from tax and short-term capital gains to be taxed at 115A

·  ITR is suitably amended to incorporate such amendment.

16. Securities held by FIIs ITR 2 ·  Amendment was made to end the controversy of categorization of income of FIIs as business income or capital gains

· ITRs suitably amended now.

17. SCHEDULES Reshuffled ITRs 1, 2, 2A and 4S

a)      Schedule BA- Details of Bank Accounts

b)      Schedule IT-Details of payments of Advance tax and self-assessment tax.

c)       Schedule TDS1 – Details of Tax Deducted at source from salary

d)      Schedule TDS2-Details of tax deducated at source on other income

e)      Schedule FT-Passport number

 INCOME-TAX SLABS FOR FINANCIAL YEAR 2014 – 2015 (ASSESSMENT YEAR 2015-2016):

I) . For Individuals

Income Slabs Tax Rates
i. Where the taxable income does not exceed Rs. 2,50,000/-. NIL
ii. Where the taxable income exceeds Rs. 2,50,000/- but does not exceed Rs. 5,00,000/-. 10% of amount by which the taxable income exceeds Rs. 2,50,000/-.
Less ( in case of Resident Individuals only ) : Tax Credit u/s 87A – 10% of taxable income upto a maximum of Rs. 2000/-.
iii. Where the taxable income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-. Rs. 25,000/- + 20% of the amount by which the taxable income exceeds Rs. 5,00,000/-.
iv. Where the taxable income exceeds Rs. 10,00,000/-. Rs. 125,000/- + 30% of the amount by which the taxable income exceeds Rs. 10,00,000/-.

II) Senior Citizen (Individual resident who is of the age of 60 years or more but below the age of 80 years at any time during the previous year i.e. born on or after 1st April 1935 but before 1st April 1955)

Income Slabs Tax Rates
i. Where the taxable income does not exceed Rs. 3,00,000/-. NIL
ii. Where the taxable income exceeds Rs. 3,00,000/- but does not exceed Rs. 5,00,000/- 10% of the amount by which the taxable income exceeds Rs. 3,00,000/-.
Less : Tax Credit u/s 87A – 10% of taxable income upto a maximum of Rs. 2000/-.
iii. Where the taxable income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/- Rs. 20,000/- + 20% of the amount by which the taxable income exceeds Rs. 5,00,000/-.
iv. Where the taxable income exceeds Rs. 10,00,000/- Rs. 120,000/- + 30% of the amount by which the taxable income exceeds Rs. 10,00,000/-.

III) Super Senior Citizen (Individual resident who is of the age of 80 years or more at any time during the previous year i.e. born before 1st April 1935).

Income Slabs Tax Rates
i. Where the taxable income does not exceed Rs. 5,00,000/-. NIL
ii. Where the taxable income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/- 20% of the amount by which the taxable income exceeds Rs. 5,00,000/-.
iii. Where the taxable income exceeds Rs. 10,00,000/- Rs. 100,000/- + 30% of the amount by which the taxable income exceeds Rs. 10,00,000/-.

*** The below is applicable for all three categories mentioned above:

Surcharge : 10% of the Income Tax, where taxable income is more than Rs. 1 crore. (Marginal Relief in Surcharge, if applicable)

Education Cess : 3% of the total of Income Tax and Surcharge.

IV) Co-operative Society

Income Slabs Tax Rates
i. Where the taxable income does not exceed Rs. 10,000/-. 10% of the income.
ii. Where the taxable income exceeds Rs. 10,000/- but does not exceed Rs. 20,000/-. Rs. 1,000/- + 20% of income in excess of Rs. 10,000/-.
iii. Where the taxable income exceeds Rs. 20,000/- Rs. 3.000/- + 30% of the amount by which the taxable income exceeds Rs. 20,000/-.

Surcharge : 10% of the Income Tax, where taxable income is more than Rs. 1 crore.

Education Cess : 3% of the total of Income Tax and Surcharge.

V) Firm (Partnership or LLP)

Income Tax : 30% of taxable income.

Surcharge : 10% of the Income Tax, where taxable income is more than Rs. 1 crore.

Education Cess : 3% of the total of Income Tax and Surcharge.

VI) Local Authority

Income Tax : 30% of taxable income.

Surcharge : 10% of the Income Tax, where taxable income is more than Rs. 1 crore.

Education Cess : 3% of the total of Income Tax and Surcharge.

VII) Domestic Company

Income Tax : 30% of taxable income.

Surcharge : The amount of income tax as computed in accordance with above rates, and after being reduced by the amount of tax rebate shall be increased by a surcharge

i. At the rate of 5% of such income tax, provided that the taxable income exceeds Rs. 1 crore. (Marginal Relief in Surcharge, if applicable)

ii. At the rate of 10% of such income tax, provided that the taxable income exceeds Rs. 10 crores.

Education Cess : 3% of the total of Income Tax and Surcharge.

VIII) Company other than a Domestic Company

Income Tax :

1. @ 50% of on so much of the taxable income as consist of (a) royalties received from Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern after the 31st day of March, 1961 but before the 1st day of April, 1976; or (b) fees for rendering technical services received from Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern after the 29th day of February, 1964 but before the 1st day of April, 1976, and where such agreement has, in either case, been approved by the Central Government.

2. @ 40% of the balance

Surcharge :

The amount of income tax as computed in accordance with above rates, and after being reduced by the amount of tax rebate shall be increased by a surcharge as under

1. At the rate of 2% of such income tax, provided that the taxable income exceeds Rs. 1 crore. (Marginal Relief in Surcharge, if applicable).

2. At the rate of 5% of such income tax, provided that the taxable income exceeds Rs. 10 crores.

Education Cess : 3% of the total of Income Tax and Surcharge.

WHO IS TO FILE THE RETURN OF INCOME?

Every person whose income exceeds the maximum amount not chargeable to tax (meaning the maximum amount as per slabs given above not suffering taxation) is required to file a return of income with the Income-tax department, per section 139 of the Income-tax Act, 1961 (the Act). The question here beckons as to who is a person, which is also specified in the Act.

The inclusive definition of the Act mentions that a person ordinarily includes the following:

1. Individual

2. Hindu Undivided Family (HUF)

3. Company incorporated

4. A Partnership / LLP Firm

5. Association of Persons (AOP) or Body of Individuals, whether incorporated or not,

6. A local authority;

7. Trusts; and

8. Every artificial juridical person, not falling within any of the categories mentioned above.

DUE DATES TO FILE THE RETURN OF INCOME

Now that we know who are to file their returns with the Department. We now turn our attention to the when of the Returns i.e. the due dates to file the return of income.

Sr. No. Due date Due date applicability to type of assessee
1. July 31, 2015 now extended to August 31, 2015 For all Individuals and firm
2. September 30, 2015 For all assessees whether individual, firm or otherwise required to get their books of account audited under the Income-tax Act, 1961 or any other law.
3. September 30, 2015 For working partners of a firm or directors of a company which is subject to tax audit u/s 44AB.
3. November 30, 2015 If any assessee is subjected to transfer pricing whether domestic or international.

 © 2015 by Dhawal Jain. All rights reserved

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0 responses to “The ITR SAGA – The Who, when and what of the Annual Disclosure Exercise”

  1. Kapil says:

    Mr. Chellappa,

    2nd holder means joint holder of a/c
    So you will disclose the 2nd a/c also

  2. vikas says:

    yes, one has to show joint account also..

  3. k v chellappa says:

    Is it necessary to show accounts where I am a second holder?

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