Step-by-step guide to tax return filing

With FY 15-16 drawing to a close, the immediate item on taxpayer agenda would be the annual filing of the tax returns.

While we individuals have approximately four months to gather our paperwork and submit the same in the form of a tax return, sight shouldn’t be lost of the fact that at the same time, the new financial year has begun and along with it comes its own share of tax liabilities and obligations. Plus the fact that Budget 2016 has ushered in a couple of changes that taxpayer also need to be aware of.

First up is the tax filing. We find that there remains an enduring misconception in the minds of some taxpayers (especially senior citizens) about the rule regarding the legal obligation of filing a tax return. These taxpayers tend to think that as long as there is no tax due from them (their income being below the taxable limit), there is no legal obligation to file the tax return. While this is true, there remains a small nuance – and that is to do with how we understand the term ‘income’ – whether it is before deductions or after reducing the deductions. For if it is the former, then there is no requirement of filing the return, however, if it is the latter, then return needs to be filed.

In other words, every individual (senior citizen or otherwise) whose total income before allowing deductions under Chapter VI-A (Sec. 80C, Sec. 80D etc.) exceeds the maximum amount which is not chargeable to income tax is obligated to furnish his return of income. As we are all aware, the basic exemption limits applicable to FY 15-16 are Rs. 2,50,000 for individuals below the age of 60 years, Rs. 3,00,000 for those who are 60 years or more and Rs. 5,00,000 for very senior citizens who are of the age 80 and above.

In terms of an example, say a senior citizen of age 75 earns a taxable income of Rs. 3,50,000. He invests Rs. 1,50,000 in PPF / ELSS thereby bringing his taxable income down to Rs.2,00,000. Yet, he would need to file his tax return, since his income before the Sec. 80C deduction was higher than the basic exemption of Rs. 3,00,000.

Moving on, we wish to draw the attention of the readers to a new Schedule in the income tax forms – Schedule AL. This Schedule is to be filled by individuals and HUFs giving details of properties held and the corresponding liabilities. It is mandatory if one’s total income exceeds Rs. 50 lakh.

The assets to be reported will include land, building (immovable assets) and cash in hand, jewellery, bullion, vehicles, yachts, boats, aircraft etc. The amount in respect of assets to be reported is the cost price of such asset to the assessee. In case the asset became the property of the assessee under a gift, will or any such mode, the cost of such asset to be reported will be the cost for which the previous owner of the asset acquired it, as increased by the cost of any improvement of the asset incurred by the previous owner or the assessee, as the case may be.

So much about the current tax filing. Now for a couple of provisions to do with the same subject but applicable from next year.

Currently, as mentioned in the previous para, if one’s income (before deductions) is below the tax threshold, one need not file the tax return.

It is being proposed to amend this rule to provide that if a person earns income which is exempt under clause (38) of section 10 (LTCG on equity shares and MFs) and income of such person without giving effect to the said clause of section 10 exceeds the maximum amount which is not chargeable to tax, shall also be liable to file return of income.

In other words, if any taxpayer’s income is below the tax threshold only due to the exemption on long-term capital gain on equity, then such person will have to file a tax return. The tax will still be nil – so essentially a nil tax return has to be filed.

Next up, Sec.  211 has been amended  to provide that the number of installments and due dates for payment of advance tax in the case of individuals, HUFs, firms, etc., shall be the same as is applicable to companies.  What this means for individual taxpayers is that from FY 16-17 onwards, advance tax will be payable four times in place of three times with the first installment of 15% required to be paid on or before 15th June instead of 15th September. The rest of the installments are adjusted taking in view of the first installment. The following table gives clarity —

                           Old Rate     New Rate

15th June              –            15%

15th September               30%        45%

15th December 60%        75%

15th March         100%     100%

Last but not the least is the change in the rules regarding withdrawal of one’s Provident Fund. Though the new norms would be applicable only for withdrawal claims received after April 30, 2016 it is nonetheless important to know the new rules.

Under the new norms, if a person were to withdraw the PF accumulation before the age of 58 years, then only the amount representing his or her total contribution plus the interest thereon may be withdrawn. The employer’s contribution along with the interest earned thereon can only be withdrawn after one reaches 58 years of age.

All the earlier rules regarding withdrawal possible after the age of 54 years, withdrawing only 90% of the total accumulations etc. stand cancelled. This then rounds up the current instalment of the change in tax filing rules and norms. Watch this space for any updates regarding the same.

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