Filing returns to be simpler if you earn less than Rs 2.5 lakh
July, 10th 2006
Filing income tax returns could become simpler down the line for scores of salaried employees who earn less than Rs 2.5 lakh a year. The government is vetting a proposal to raise the threshold for filing I-T returns, using the tax deducted at source-cum-return form from Rs 1.5 lakh to Rs 2.5 lakh. The form known as 16AA is issued by the employer to his employee and doubles up as the IT return form.
This certificate is given to salaried employees who do not have agricultural income, business income, capital gains or any income on which tax is deducted at source. For instance, those who earn an interest income of over Rs 5,000 on a bank FD will not be eligible for Form 16 AA.
If the proposal is cleared, more aam-salaried employees will be spared from filing separate returns. It will suffice if they just fill their personal details and verify Form 16AA. The onus is on the employer to submit this form to the tax department.
There is a case for expanding the scope of Form 16AA considering that the I-T exemption limit has been hiked to Rs 1 lakh and the top marginal rate of kicks in at Rs 2.5 lakh. A final decision is to yet to be taken on the timing. As the last date for filing of returns for non-corporate assessees including salaried assessees is July 31, one view is that the limit for filing returns using the TDS-cum-return form can be hiked next fiscal.
For starters, Form 16 AA is akin to Form 16, which is a certificate issued by the employer giving details on the salary earned and the tax deducted at source on behalf of the employee. This certificate should be filed along with the IT return.
For assessment year (AY) 06-07, salaried tax payers have various options to choose from, to file their tax returns. These include filing returns in the new Form 2F which is the four-page expanded version of Naya Saral. No proof is required for prepaid taxes and no annexures need to be attached to Form 2F. This form is for salaried taxpayers who do not have business income or agricultural income or capital gains (except long-term capital gains from securities transaction tax paid) or those who do not own more than one house. It, however, is not mandatory to fill the cash flow statement summarising information on incomings and outgoings along with this form.
Those who do not use Form 2F, can file returns in Form 2, Form 3 or Form 2D all of these are return forms for non-corporate assessees. However, 2E (Naya Saral) will be discontinued from July 31, this year. Close to 2.7 crore asseesses filed I-T returns in AY 2005-06.