The cat is finally out of the bag. The new income tax returns introduced by the finance ministry have come in a package of eight forms referred to as ITRs (Income Tax Returns). Salaried Individuals who were accustomed to filing in their returns in Form 2D or Saral till last year will now be required to fill in the new form ITR 1.
However, unlike Saral which served all categories of individuals, ITR 1 can be filled in by only those individuals who derive their income from salary, pension and interest. Agricultural income exceeding Rs 5,000 is also required to be reported in this return.
For income from any other source, there is a separate ITR depending upon the nature of taxable income for the year. Though the much feared cash flow statement has been dropped from the new returns, the ministry has ensured adequate transparency of the return by incorporating a schedule for disclosing the transactions reported in the Annual Information Return (AIR). That is additional work for the taxpayer.
AIR is the return filed in by the regulatory authorities such as the banks, trustees of the mutual fund, companies issuing shares, bonds or debentures, registrars and the RBI for specific transactions entered into with them by their customers. However, these transactions will henceforth be disclosed by the individual tax payers in their returns as well.
Thus, if one has purchased or sold a house property whose value exceeds Rs 30 lakh or if one has purchased shares of a company for more than a lakh of rupees, the same will be disclosed in the tax return.
The other transactions that would be disclosed in AIR include acquisition of bonds or debentures for Rs 5 lakh or more in a year; cash deposits of Rs 10 lakh or more in a savings bank account in a year; credit card bill payment aggregating to Rs 2 lakh or more; and mutual fund unit purchase for Rs 2 lakh or more in a year.
This is probably done to help the tax department in matching the transactions detailed in the AIR with the tax payers return. Thus, any discrepancy in the ITR with that of AIR may fall heavily on the tax payer. One of the key features of the ITRs is that these are Annexure-less returns.
Thus, those habituated to attaching the TDS certificates to their returns will now find a change in this routine. The tax department has made it mandatory for taxpayers not to attach Form 16 (issued by the employer) or 16A (issued by other tax deductors) or any other document to the new tax return.
In fact income-tax officials have been instructed to detach and return back all such documents attached to the ITR to the tax payer. While this might save the trouble of attaching a plethora of documents to ones return, it will add on to the burden of disclosing very minute detail forming part of these documents in the return itself.
This includes quoting the TAN of the tax deductor too. Thus, henceforth, the tax payer will have to be careful not just with PAN but also with TAN(s). The tax payer will be required to fill in the details of salary, pension and interest as given in the Form 16 or 16 A, respectively.
However, if the income has not been correctly computed in these forms, the taxpayers are expected to feed in correct details of their income in the return. Again, while Saral was required to be filled in duplicate (duplicate copy serving as an acknowledgement); a separate acknowledgement form is required to be filled in along with the new ITR.
An ITR need not be filled in duplicate. It is also important to note that these ITRs are year specific forms and are applicable for financial year 2006-07 only. Thus, one can continue using the old Saral for filing returns for years prior to 2006-07.