It's better to file physical returns as online mode is complicated
July, 15th 2008
Sub Heading : It's better to file physical returns as online mode is complicated, doubles work
Salaried individuals these days can pay most bills online. But what about income tax returns? Salaried individuals and Hindu undivided families (HUFs) can file their tax returns online (also called e-filing). However, it is not compulsory for them to do so. In many cases, it may not even be desirable. Reason: it can be troublesome.
Consider: Without a digital signature, you still have to go the tax office to submit your forms. It thus doubles your work. Getting a digital signature costs you upwards of Rs1,000, and even that will work only for one year or two. You have to keep paying for renewing your digital signature.
Two, the government has not bothered to update certain tax changes in the online forms. Thus you may claim mediclaim deductions of Rs15,000, but the site will only allow you Rs10,000. Three, e-filing is supposed to do away with paperwork. But some provisions in the Income Tax Act have been left unchanged, and thus the taxman may still insist that you submit tax proof (like form 16 given by employers). Four, even after you have finished filling in the e-form, it may take three or four time to upload it.
To file taxes online, individuals have to log on to https:www.incometaxindiaefiling.gov.in. But don't expect this to be a smooth affair.
After logging onto the website, the right Indian Income Tax Return (ITRs) form has to be chosen. There are eight ITRs from which you will have to choose the one that applies to you.
For most salaried individuals, ITR-1 will do as long as they don't have any capital gains or income from house property. For those who do, ITR-2 is the form to fill up.
Once the relevant form has been identified, it has to be downloaded from the following link https:incometaxindiaefiling.gov.inportalindividual_huf.do. This form is an excel file.
There are certain glitches in the ITR 2 excel form. For the financial year 2007-08 (or assessment year 2008-09), the maximum deduction allowed for paying mediclaim premiums under Section 80D of the Income Tax Act was Rs15,000, and Rs20,000, in case of senior citizens. This form it seems hasn't been updated. "The column for mentioning deduction under section 80 (D) pertaining to mediclaim deductions doesn't accept an amount above Rs10,000, in spite of the fact that the deduction limit was increased during Budget 2007 to Rs15,000 for individuals and Rs20,000 for senior citizens," says Paras Savla, a chartered accountant who runs Paras Savla & Associates. It allows a deduction of Rs10,000 and Rs15,000 for senior citizens, as was the norm for financial year 2006-07 (or assessment year 2007-08). Therefore, if you are a senior citizen paying a mediclaim premium of more than Rs15,000, the maximum deduction this form will allow you is Rs15,000.
The form needs to be filled up with the help of Form 16 (given by your employer). Once the form has been filled up, it needs to be saved as an XML file. You don't need to be an expert for this. The form has a "generate -XML" button in-built into it. After this you need to create a user ID and password. The user ID is actually your income tax permanent account number (PAN).
After logging in using the user ID and password, you will have to click on the submit return link on the home page of https:www.incometaxindiaefiling.gov.in. While uploading the file, you need to encrypt the file using a digital signature. A digital signature ensures that no one else files your return. After you have encrypted the file, you need to upload it. A digital signature is essentially a file which needs to be installed on your computer. When e-filing the return, portions of this file need to be pasted at specified places in the form. There are various intermediaries in the market who issue this signature. Some of the intermediaries are MTNL CA, TCS, etc (see table). Depending on which intermediary you approach, the digital signature can be obtained for a period of one or two years and usually costs above Rs1,000. This makes the entire process of filing income tax returns online relatively more expensive.
Fees for physical filing of tax returns differs from one chartered accountant (CA) to another. The fees range anywhere between Rs300 and Rs2,500 for ITR1 and ITR2 depending on the complexity of return filing. So if you just have salaried income, e-filing really doesn't make sense.
If you don't have a digital signature, you can still file an e-return, but you have to submit a hard copy of the completed return to your tax office within 15 days after that.
Once the file is uploaded, the ITR-V form is generated and this is the proof of you having filed your return. Without a digital signature, you need to print out two ITR-V forms. One has to be submitted to the tax office and the receiving clerk or officer will stamp and return the other one for your records.
This is where the entire process of filing a return online weakens. If a visit to the income tax department is necessary, then one might as well fill up the entire form manually. Nevertheless, it does help in case of individuals who have bulky tax returns. "We save a lot of paper, while filing returns electronically. Earlier, for assessees whose TDS (tax deducted at source) was high, we had to take prints of at least 20-24 pages, sometimes even 100 pages. But with the e-filing, only two copies of a one-page return are enough," says Sumanlal Lodaya, chartered accountant who runs SS Lodaya & Associates. There are other issues also with e-filing. "Sometimes you have submit the returns three-four times for it to be accepted. In my area there is load-shedding for three-four working hours. So, though one can file returns post-working hours as well, in CA offices the staff is not available later on to file returns online," says Salva.
If one is to follow the Income Tax Act in its true letter and spirit, e-filing is a 'defective' way of filing returns. The explanation accompanying Section 139(9) of the Income Tax Act clearly states that any return that is not accompanied by annexures, TDS certificates, etc, is 'defective.' "Using this loophole in the Act, the taxman can insist on physical documents for verification after you have e-filed your return," says a CA who was unwilling to be named. Given these reasons, it is best to physically file your income tax return rather than go the e-way.