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Don't miss these finer points in income tax return filing
July, 21st 2015

Every year around this time, the Central Board of Direct Taxes (‘CBDT’) notifies the tax return forms which taxpayers are required to use for filing the tax return of the past financial year (‘FY’). With each year going by, tax authorities have amended the tax return forms to obtain new and additional information from taxpayers to administer and monitor appropriate compliances.

This year, with the focus on curbing the menace of black money, CDBT had notified tax returns on 15 April 2015, which required taxpayers among other details to disclose number of foreign tours/trips along with expenditure incurred on them, details of bank accounts held individually or jointly along with accounts as on 31 March. However, facing severe criticism over the nature and quantum of information required in the tax return forms, the CBDT has reissued the tax return form with several modifications, which will result in easing of compliance burden on the taxpayer and make the process simpler and convenient. Resultantly, the due date of filing the tax return has been extended to 31 August 2015.

Let us see the revised tax return forms and its applicability in the case of three friends Anand, Mohit and David, who qualify as Resident and Ordinary Residents in India.

Anand and Mohit are IT professionals and have two sources of income in India – income from salary and dividend income amounting to Rs 10,000. Until last year, Anand was not eligible to use ITR 1 (‘SAHAJ’), since his dividend income, which is exempt from tax exceeded Rs 5,000. However, this year, the limit of Rs 5,000 has been removed and now taxpayers having exempt income, without any limit could use the ITR 1 form.

Mohit, in addition to income sources of Anand, has agricultural income of Rs 15,000 and was elated to learn that the limit for exemption has been removed for using ITR 1 form. Anand interrupted and informed Mohit that in case of agricultural income in excess of Rs 5,000 makes him ineligible to use ITR 1. Further Anand mentioned that Mohit could use ITR 2A, a simplified version of ITR 2. Intrigued by Anand’s awareness of tax return forms, Mohit asked him to help him with key changes. Anand mentioned that taxpayers are now required to:

• Provide their passport number, wherever available
• Provide details of all bank accounts held by them, expect for accounts which are dormant for past 3 years. The bank details include IFSC code, bank name, account number, type of account and preferred account for obtaining tax refund, if any
• Details of utilization of amount deposited in capital gains account scheme now needs to be provided to monitor reinvestment supporting capital gains
• Apart from the foreign asset/ income details that are required to be furnished in Resident taxpayers, this year’s additional details with respect to such asset or income is required to be reported. However, an outright exemption for reporting of foreign assets for taxpayers, who are not Indian citizens and are on business, employment or tourist visa, is provided, if the assets have been acquired when the taxpayer was a non -resident and no income has been earned in the FY from the said asset
• Non-resident taxpayers claiming tax treaty benefit (including exemption or lower rate of taxation) will be required to report details of such claim, which includes country, article tax treaty, rate of tax, whether tax residency certificate is obtained, etc

Listening to the last point, there was no end to David’s joyous feeling as he is no longer required to spent hours collating information regarding his assets, which were acquired when he was non-resident in India and no income is derived from that assets. However, Anand pointed to David that the way the note in ITR 2 is worded regarding the exemption, his spouse may be still be required to report her foreign assets, without any exemption since she hold a dependent visa, which is not specifically covered in the exemption.

Lastly, Anand mentioned to Mohit and David that choice of right type of tax return form to be used depends upon the nature of income and requirement to report foreign assets/income, etc a taxpayers has in the year:

The fruit of patience is sweet and anything worth having is definitely worth waiting is squarely applicable to the revised tax return forms notified by the CDBT this year!

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