Income Tax Return Registration

Income Tax Return Registration

WHAT IS INCOME TAX?

Income-tax is a tax levied and collected by the Central Government on an income of a person. Income-tax is calculated at specified rates on total income of a person and paid directly to the Central Government. The provisions relating to the income-tax are governed by the Income-tax Act, 1961.

WHAT IS INCOME TAX RETURN?

Income Tax Return is the form in which an assessee files information about his Income and tax thereon to the Income Tax Department. The Income Tax Act, 1961, and the Income Tax Rules, 1962, obligates citizens to file returns with the Income Tax Department at the end of every financial year. These returns should be filed before the specified due date. Every Income Tax Return Form is applicable to a certain section of the Assessees. It is imperative to know which particular form is appropriate in each case. Income Tax Return Forms vary depending on the criteria of the source of income of the Assessee and the category of the Assessee.

WHAT IS THE IMPORTANCE OF FILING INCOME TAX
RETURN?

A lot of individuals seem to think that filing tax returns is voluntary and therefore dismiss it as unnecessary and burdensome. As we will see, this is not a very healthy perspective on tax-filing. Filing tax returns is an annual activity seen as a moral and social duty of every responsible citizen of the country. The government mandates that individuals who earn a specified amount of annual income must file a tax return within a pre-determined due date. The tax as calculated must be paid by the individual. It also provides a platform for the individuals to claim a refund, among other forms of relief from time to time.

DUE DATE FOR FILING RETURNS

Due dates of filing income tax return for FY 2017-18(AY 2018-19) are as under :
1. 31 July 2018 for Individuals not requiring audit under any law.
2. 30 September 2018 for Companies or a working partner of a firm or Individuals requiring audit under any law.
3. 30 November 2018 for any person (corporate/ non-corporate) who is required to furnish a report in Form No. 3CEB u/s 92E.

VARIOUS FORMS FOR INCOME TAX RETURN

Only those Forms which are filed by the eligible Assessees are processed by the Income Tax Department of India.
The following forms are to be taken into consideration by individuals when filing returns as per the Central Board of Direct Taxes :

  • ITR-1(SAHAJ)
  • ITR-2
  • ITR-3
  • ITR-4 (SUGAM)

The following income tax return forms are only applicable to companies and firms:

  • ITR-5
  • ITR-6
  • ITR-7

APPLICABILITY OF FORMS

ITR-1:

This income tax return form is also called a Sahaj form. The ITR-1 form is to be filed solely by an individual taxpayer. Any other assessee liable to pay tax will not be eligible to avail of this form for the purpose of filing their returns. This form is applicable for the following:

  • Individuals who earn income through salary or through means such as a pension.
  • Individuals who earn income from a single housing property.
  • Individuals who have no income from any other business or who have no income from the sale of any assets ie: capital gains.
  • Individuals who do not own any assets or property in countries other than India.
  • Individuals who do not earn income from any country outside India.
  • Individuals whose income from agriculture is below Rs 5,000.
  • Individuals who earn income from various investments or sources such as Fixed Deposits, Investments, Shares etc.
  • Individuals who have not earned income from any windfall such as lotteries or horse racing.
  • Individuals who wish to club the income of their spouse or underage child with their own income, so long as the income to be clubbed is in accordance with the criteria mentioned above.
ITR-2:

The ITR-2 Form is generally used by individuals who have accrued income through the sale of assets or property as well as individuals who earn income from countries outside India. Individuals or Hindu Undivided Families (HUF) can avail of this form to file their returns. This form is applicable for the following:

  • Individuals who earn income through salary or through means such as a pension.
  • Individuals whose total income exceeds Rs. 50 lakhs.
  • Individuals who earn dividend income exceeding Rs. 10 lakhs taxable under Section 115BBDA.
  • Unexplained credit or unexplained investment taxable at 60% under Sections 68, 69, 69A, etc.
  • Individuals who earn income through the sale of assets or property in India ie: capital gains.
  • Individuals who earn income from more than one housing property.
  • Individuals who do not earn income from any business venture.
  • Individuals who own assets in countries outside of India.
  • Individuals who earn income from countries outside of India.
  • Individuals whose income from agriculture is above Rs 5,000.
  • Individuals who earned income from any windfall such as lotteries or horse racing.
ITR-3:

The ITR-3 Form is to be used by a taxpayer who is either an individual or a Hindu Undivided Family (HUF) who solely operate as a partner in a firm but who do not conduct any business under the firm or who do not earn any income from the business conducted by the firm. This form can be filed by those taxpayers whose taxable income earned from business is only in the form of the following received as a partner:

  • Salary
  • Total income exceeding Rs. 50 lakhs
  • Dividend income exceeding Rs. 10 lakhs taxable under Section 115BBDA.
  • Unexplained credit or unexplained investment taxable at 60% under Sections 68, 69, 69A, etc.
  • Commission
  • Bonus
  • Interest
  • Remuneration
ITR-4:

The ITR-4 form is to be used by those individuals who conduct a business or who earn income through a profession. This form is applicable to any type of business, undertaking or profession, with no limit on the income earned. Along with the income earned from business, taxpayers can also club any income they receive from windfalls, speculation, salaries, lotteries, housing properties etc with their business income. Any individual ranging from shopkeepers, doctors, designers, agents, retailers, contractors etc is eligible to file their income tax returns using this form.

ITR-5:

The ITR-5 form is to be used by only by the following entities for filing income tax returns.

  • Firms
  • Limited Liability Partnerships (LLPs)
  • The body of Individuals (BOI’s)
  • Association of Persons (AOPs)
  • Co-operative Societies
  • Artificial Judicial Persons
  • Local Authorities
ITR-6:

The ITR-6 form is to be used only by companies except for those companies or organisations that claim tax exemption as per Section 11. Those organisations that claim tax exemptions as per Section 11 are organisations wherein the income received is accumulated from the property used for the purpose of religion or charity. This particular income tax return form can only be filed online.

ITR-7:
  • Section 139(4A) – Under this section, returns can be filed by those individuals who receive income from any property that is held for the purpose of charity or religion in the form of a trust or legal obligation.
  • Section 139(4B) – Under this section, returns are to be filed by political parties provided their total income earned is above the non-taxable limit.
  • Section 139(4C) – Under this section, returns are to filed by the following entities:
    •       Any institution or association mentioned under Section 10(23A).
    •       Any association involved with scientific research.
    •       Any institution mentioned in Section 10(23B).
    •       Any news agency.
    •       Any fund, medical institution or educational institution.
  • Section 139(4D) – Under this section, returns are to be filed by entities such as colleges, universities or any other such institution wherein income returns or loss is not required to be provided in accordance with other provisions outlined in this section.
  • Section 139(4E) and Section 139(4F) – Returns are to filed by Business Trusts and Investment Funds.

PENALTIES FOR NOT FILING INCOME TAX RETURN

If you fail to furnish your tax return, then you will face penalties u/s 234A of 1%/month of taxes due up to the date of filing. Additionally, the IT department might decide to put your business under scrutiny and take a closer look at your activities, which can result in penalties, including prosecution, in extreme cases. U/s 276CC, if the ITD finds you purposefully failed/evaded taxes, then you can face the following penalties:

  • You can face imprisonment from 3 months to 2 years if the taxes evaded was under Rs. 25 lakh
  • You can face imprisonment from 6 months to 7 years if the taxes evaded was more than Rs 25 lakh

The government has introduced new income tax forms for AY 2018-19. Rules are getting tough day by day or we can say that taxpayers must be active and punctual now to avoid any unnecessary penalties.

A new section Sec 234F is inserted to levy penalty for late filing of ITR. Sec 234F is effective from Assessment Year 2018-19 ( Financial Year 2017-18).

If ITR for AY 2018-19 is filed after due date (31st July for individuals without audit, 30th Sept for other persons) but before 31st Dec of the Assesment year (31-12-2018 in case of Assessment year 2018-19) then Penalty of Rs.5000/- will be levied and If ITR is filed after 31st Dec then Rs. 10000 will be levied as penalty.

Exception:- If the total Income of a person is below or equal to Rs. 5 Lakhs, then penalty will be restricted to Rs.1000 only.

The fee (penalty) will be as follows:
Particulars
Fee (Penalty)
Return is filed on or before 31st December of Assessment Year but after the due date and total Income exceeds Rs. 5 Lakh Rs.5000
Return is filed on or before 31st December of Assessment Year but after the due date and total Income do not exceeds Rs. 5 Lakh Rs. 1000
In any other case Rs. 10000

 

MAJOR CHANGES IN INCOME TAX RETURNS

1. Provide break-up of salary:

Assessee with income from salary, one house property and other sources (like interest) use the most basic one-page ITR-1 or Sahaj form. The form now seeks additional details of salary. The taxpayer first needs to fill up the salary amount excluding allowances, perquisites, and so on. Then, provide details pertaining to perquisites, allowances, ‘profit in lieu of salary’, etc. Up to the assessment year 2017-18, an assessee was required to mention only the taxable figure of salary.

2. Income from House Property:

The new ITR-1 Sahaj form also seeks details about income from property such as gross rent received/ receivable/ letable value; tax paid to local authorities; annual value; interest payable on borrowed capital; and income chargeable under the head house property. The form now wants the taxpayer to provide the break-up of gross rent received, tax paid to local authorities, etc.

3. The taxpayers now need to give specific details in case of capital gains too:

The new ITR forms have specific columns to report each capital gain exemption separately. Details of each capital gains exemption under Sections 54, 54B, 54EC, 54EE, 54F, 54GB and 115F need to be reported in its applicable column now. A taxpayer availing these capital gains exemptions needs to mention the date of transfer of original capital asset which was missing in earlier ITR forms.

4. Penalties on late filing of tax returns:

If the return is furnished after the due date (July 31) but before December 31, the penalty is Rs 5,000 and Rs 10,000 after that. Tax experts believe that the income-tax software will not allow assessees to start filing their returns unless they pay the penalty first. Relevant changes have been included in the new ITR forms wherein a new row is added to enable the taxpayer to fill the details of late filing fees.

5. ITR form for Non-Resident:

Instead of the simple (ITR)-1 form, non-resident Indians(NRIs) will have file returns using the ITR-2 which seeks more information. Unlike last year, non-residents cannot use the ITR-I. “The ITR-1 form is not applicable to non-residents and not ordinarily residents, who would now have to file their tax returns in the ITR-2 form.

6. Refund in a foreign bank account:

Non-residents can seek a refund in a foreign bank account by providing details of one foreign bank account.

7. ITR 4 seeks more disclosure:

The presumptive taxation scheme – meant for small businesses such as freelancers and shop owners and for professionals such as doctors – does not require the taxpayer to maintain books of accounts or get their financials audited. The assessees can pay a percentage of their total turnover as the tax. The old ITR-4 sought only four details — total creditor and debtors, total stock-in-trade, and cash balance. But the new form asks for more financial details of the business such as the amount of secured and unsecured loans, advances, fixed assets, capital account and so on. The details sought essentially requires the person to maintain a balance sheet to report the information asked.

8. GST details in income tax now:

The business owner also needs to provide GST number of the assessee and the amount of turnover based on the GST return filed. Earlier, business owners reported a different turnover for income tax and other indirect taxes based on their convenience. The details disclosed in the ITR can now be crossed-checked with the GST filing. These details are essentially sought after the implementation of Goods and Services Tax (GST).

9. Changes in ITR 2:

The newly notified ITR-2 form is no longer applicable for individuals who have profits and gains from any business or profession. The assessee now needs to use ITR-3 to file the return. Until last year, a partner was allowed to file the return using ITR-2.

10. Reference for employee stock options:

TThe government had made changes to the taxation of employee stock option plan in an unlisted firm in the previous year’s Budget. The amendments are applicable from this assessment year. The new provisions state that if unlisted shares are transferred at a price which is lower than its fair market value (FMV), it would still be taxed at the FMV that a merchant banker or a chartered accountant calculates. While filing the return, employees will need to obtain a valuation report in case of sale of unlisted shares to ensure that they correctly report the capital gains or loss. The ITR form also asks for the detailed break-up of such transaction.

11. Changes in ITR 6:

The ITR-6 meant for businesses now seeks many details about GST transactions. A company needs to disclose transactions in exempt goods or services, transactions with composite suppliers, transactions with registered entities and total sum paid to them and even those with unregistered entities. Business owners need to ensure that their GST returns filed matches with the details provided with those provided in the income tax form.
The new ITR 6 requires every unlisted company to provide details of all beneficial owners who are holding 10% or more voting power (directly or indirectly) at any time during the year 2017-18. These companies are required to provide the name, address, percentage of shares held and PAN of the beneficial owners.

12. Firms are required to quote the Aadhaar number of their partners or members. Similarly, in case of a trust, Aadhaar number of related functionaries have to be mentioned.
13. Certain types of taxpayers are now required to mention the registration number of the firm of a chartered accountant which has done an audit for the tax return.
14. Businesses will have to disclose income from the property.
15. Removal of ‘Gender’ from personal information in ITR – Individual taxpayers who are filing an income-tax return in Form ITR 2 or ITR 3 or ITR 4 isn’t required to mention the gender, i.e., male or female or transgender, as the column of gender has been removed.

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