Tax Return and Points to keep in mind

First of all, Congratulations and thanks for being a handful of asseessee who has opted to file income tax return. You would be proud to know that taxes you pay is utilized for the development of the nation’s development, so you are part of development.

With ITR date approaching, we too should get ready with the filing. Let us understand the process. The income (which includes loss) is divided under the following five heads:

a. Income from Salary

b. Income from House Property

c. Income from Business Income

d. Income from Capital Gains

e. Income from other sources

So, it is necessary to know your source (s) of income. Once we know the source or multiple sources of income, we need to select the appropriate form released by the income tax department. It is necessary that correct form is selected to avoid any kind of query from the IT department.

So, if you are a Salaried Asseessee, before filing of ITR you need to collate the following data: –

a. Your residential status during the previous year.

b. Bank Statements (all your banks).

c. Form 16 issued by the organization.

d. Form 26 AS available in Income Tax portal.

e. Details of your purchase or Sale of any property during the year.

f. Details of any sale or purchase of stocks and/or Mutual funds.

g. Interest income from Banks (FD and Saving accounts).

h. Any other income which you may have earned during the year.

i. Any other matter which you may feel is necessary for ITR filing.

After collecting the above data, we should analyze and tabulate the return data. If any tax is payable, we should pay it as self-assessment tax at the earliest for the period ended 31.03.2022 to avoid for the payment of interest on taxes.

We should ensure the ITR is filed on time to avoid any monetary penalty. If ITR is filed beyond the due date penalty arises. In addition, interest on tax amount is calculated separately

Often, we come across people, who tend to hide their income to avoid the taxes. We should understand the GOI is using hi tech data analytic machinery to trace your transactions and is aware with most of your financial transactions.

 So, even if you manage to file your ITRs without disclosing the data, very soon you would be receiving the notice from IT department wherein you need explain them why have you not shown the correct tax. If you are unable to explain, it may result in the addition to income/disallowance of the expenditure claimed resulting in burden of tax. In case of non-declaration of income, the penalty may be more than your taxes. This may give you a short-term peaceful sleep but many-many sleepless nights facing the departments

Once of the most common method employed is showing income as agricultural income. It is understood by asseessee to be one of the easiest ways to dodge the taxation department.

Now let us understand the concept of agricultural income.

In India, agricultural income refers to income earned or revenue derived from sources that include farming land, buildings on or identified with an agricultural land and commercial produce from a horticultural land. Agricultural income is defined under section 2(1A) of the Income Tax Act, 1961.

 Agricultural income generally means:

(a) Any rent or revenue derived from land which is situated in India and is used for agricultural purposes.

(b) Any income derived from such land by agriculture operations including processing of agricultural produce so as to render it fit for the market or sale of such produce.

c) Any income attributable to a farm house subject to satisfaction of certain conditions specified in this regard in section 2(1A).

(d) Any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income.

As per Section 10(1) of the Income Tax Act, 1961, agricultural income is exempted from taxation. The central government cannot levy tax on the agricultural income received. However, agricultural income is considered for rate purposes while assessing the income tax liability if the following two conditions are met:

Net agricultural income is greater than Rs. 5,000/- for previous year.

Total income, excluding net agricultural income, surpasses the basic exemption limit (Rs. 2,50,000 for individuals below 60 years of age and Rs. 3,00,000 for individuals above 60 years of age).

Let us assume that the agricultural income is Rs 300,000. Other income is case a Rs 300,000 case b Rs 600,000

	Case A	Case B
Agricultural Income (A)	300,000	300,000
Other Income(B)	300000	600000
Tax on other income only i.e. (B) –  (C)	0 (i.e., 300,000)	33800 (i.e., 600000)
Tax including agricultural income (D)	32500	92500
Tax For rebate of agricultural income (Basic Tax exemption (Rs 250000 + Agricultural income (E)	(250000+300000)   22500	(250000+300000)   22500
Gross Tax to be paid (D-E)	10000	72800
Rebate u/s 87A (If the income is between 250000-50000)	10000	0
Net Tax Payable (subject to interest u/s 234)	0	72800

So, it can be seen in effect agricultural income, even though exempt will be used for the purpose of tax calculation and will result in large tax payment. The income is used in calculation of taxation.

Now the GOI has given us option to choose differential tax slabs so it benefits the tax payer. Let us see the tax impact on new and old regime:

Tax Regime	Old Regime	New Regime
Taxable Income	1000000	1000000
All deduction and exemption which can be claimed	150000	150000
Tax	85,800	78,000
Taxable Income	1600000	1600000
All deduction and exemption which can be claimed	150000	150000
Tax	2,75,544	226,200
Taxable Income	600000	600000
All deduction and exemption which can be claimed	150000	150000
Tax	–	23,400

So, we see from above analysis, that new regime is not always beneficial and one needs to calculate the tax to find which regime is better. Attached are the tax rates under both tax slabs for your easy of understanding and calculation

So, it is apparent that old rates are beneficial to one set of Tax Payers and new rates are useful to another set of buyers. It all depends upon the total taxable income and the deductions to be claimed.

For easy the rate of taxation is provided below:

New Tax Slab				Old Tax Slab
Income Tax Slab	Tax Rate	Remarks		Income Tax Slab	Tax Rate	Remarks
Upto 2.50 Laks	0%	Benefits of indexation and deduction is not available		Upto 2.50 Laks	0%	Benefits of indexation and deductions are allowed
Rs 2.50 to 5Lacs	5%			Rs 2.50 to 5Lacs	5%
Rs 5 to 7.50 Lacs	10%			Rs 5 to 10.00 Lacs	20%
Rs 7.50 to 10.00 Lacs	15%			Rs 10.00 laks and above	30%
Rs 10.00 to 12.50 Lacs	20%
Rs 12.50 to 15Lacs	25%
Above 15 Lacs	30%

File the return timely and correctly. Be a part of nation’s development