Come June/July and the salaried and self employed individuals start bracing themselves to file their income tax returns (ITR) for the previous financial year. The last date for this annual ritual, falls due on July 31. Even though tax has already been deducted from income and there is no further liability to pay tax, there is still a need to file ITR.
If taxable, income during FY07-08 exceeds the exemption limit of Rs 1,10,000 (Rs 1,45,000 and Rs 1,95,000 in case of a women and senior citizens, respectively, resident in India), there is a legal obligation to file ITR.
Get ready to file ITR as early as possible, instead of waiting for the due date to arrive. For this purpose, keep all documents, (viz: Form 16/16A, bank account summaries and details of property, rental income, etc) ready and handy, before calculating tax liability and filling ITR. Often, interest income on savings bank account and FDs and income of minor children is overlooked while filing ITR. Such income is taxable and any omission could attract penal consequences.
Additionally, individuals are required to furnish information on specified transactions in ITR, which are currently being disclosed through Annual Information Return (AIR) by the specified parties. Although, not yet mandatory, the new ITR can also be filed electronically. If uploading is without digital signature, one needs to print Form ITR-V and submit the same to the tax office, alongwith the ITR, within 15 days of e-filing of ITR. Here, the process of filing ITR gets completed only upon physical filing of ITR-V.
E-filing is more convenient and involves no personal interface with the tax office staff. The return can be filed anywhere and anytime. Currently, however, the e-filing scheme is restricted only to tax payers, who are assessed or are assessable to tax at any of the 60 cities specified in schedule A of the Notification No 1073(E) dt: 30/9/04.
All capital cities of major states and other large cities in all states find place in this notification. Tax payers may face some problems while filing their tax returns, such as frustratingly slow downloads and a very high uploading time. The portal often hangs up upon minor typewriting errors.
Under physical filing, the individual has to file the respective ITR along with the Acknowledgment form with the Tax Officer. The return needs to be signed and verified by the tax payer personally. The CBDT has not provided any clarification on the problems/issues faced by an individual while filling up the information in the ITR.
For eg: on debatable tax claims, which are subject to differing interpretations, the individual may wish to make the claim by putting appropriate notes, or disclose certain facts, in the ITR, in order to avoid any penal consequences for concealment. However, making suitable disclosures of such claims in the ITR, is practically impossible, as no enclosures are permitted to be filed with the ITR. With the introduction of the Tax return preparers (TRP) scheme, tax payers can seek the assistance of TRPs for filing their ITR.
Sandip Mukherjee & Ajit Shetty (Authors are executive director and , manager, PricewaterhouseCoopers)