For people [not subject to tax audit provisions under Income-tax Act, 1961 (‘the Act’)], the earnings tax return (ITR) filing deadline for Financial Year (FY) 2020-21 (Assessment Year 2021-22) has been extended from 31 July, 2021 to 30 September, 2021 owing to the ongoing COVID-19 pandemic. ITR types (Forms 1, 2 and 4) for FY 2020-21 have currently been notified by the Central Board of Direct Taxes (CBDT).
In this report, a handful of significant elements which one need to think about ahead of filing ITR have been enumerated:
1. Choose appropriate ITR type
It is significant to pick the applicable ITR type based upon the taxpayer’s residential status and earnings earned from different sources for an correct filing. For instance, type ITR-1 can only be made use of by a resident person possessing total earnings up to Rs 50 lakh from salary, one home home and earnings from other sources. It can not be made use of by a taxpayer who is a non-resident or a not ordinary resident or have capital gains for which type ITR-2 has to be made use of.
2. Choose new tax regime or old tax regime whichever is more advantageous
The Finance Act, 2020 introduced a new optional tax regime for taxpayers with modified tax slabs and prices, in lieu of foregoing prescribed exemptions and deductions. Taxpayers will have the choice to select from the old and new tax regimes though filing the tax return. Salaried taxpayers can also transform the regime, which they have currently declared to their employer at the time of filing ITR.
3. Prefilled ITR types
This year, ITR types will import pre-fill details such as individual specifics of the taxpayer along with specifics of salary earnings, dividend earnings, interest earnings and capital gains as offered in the Form 26AS. This would help taxpayers in ease of filing ITR as most of the crucial specifics would currently be captured therein.
It will, consequently, be relevant for people to confirm this details and make important additions of earnings not reported therein in the tax return.
However, in case the details is incorrect it may well be advisable to attain out to the bank/ payor of earnings and so on. to appropriate the information in their quarterly TDS returns/ other filings so that correct details is resultantly reflected in your Form No. 26AS.
4. Verification of prepaid taxes with Form 26AS
It is pertinent for taxpayers to confirm their prepaid taxes like tax deducted at supply, advance tax and self-assessment tax with Form 26AS. Any discrepancy therein really should be notified either to the employer (in case of salary earnings) or other payers (in case of other incomes) or banks (for advance tax/ self-assessment tax payments) for important rectification which is crucial for seamless processing of the tax return by the tax division.
5. Payment of balance taxes
Once the total taxable earnings is determined, post like earnings beneath all heads and claiming important deductions offered beneath Chapter VI-A of the Act, applicable tax prices really should be applied to compute the total tax liability. Any taxes due on the tax return following claiming credit of prepaid taxes really should be paid like applicable interest if any ahead of filing the tax return. It would be pertinent to note that if such self-assessment tax exceeds Rs 1 lakh, it really should be paid ahead of 31 July 2021 to stay clear of further interest liability even although the tax return filing deadline is extended to 30 September 2021.
6. Various disclosure needs
Following disclosures of different assets and economic investments types an integral aspect of an ITR:
# Specified specifics of all Indian bank accounts
# Specified specifics of unlisted equity shares
# Details of directorship held in Indian or foreign corporations.
# Schedule Assets and Liabilities: Details of specified assets [such as land, building, movable assets etc.), financial assets (bank deposits, shares & securities, cash in hand, etc.)] and corresponding liabilities are to be disclosed in case the total earnings of an person exceeds Rs 50 lakh.
# Schedule Foreign Assets: Ordinarily Resident people are obligated to furnish specifics of their assets held outdoors India (each as an owner and as a beneficiary) as per specified disclosure suggestions.
7. Reporting Exempt Income
Taxpayers are needed to report the exempt earnings beneath ‘Schedule EI’ such as agriculture earnings, exempt earnings of minor youngster, earnings not chargeable to tax as per Double Taxation Avoidance Agreement, and so on.
8. Change of employment in the course of the year
In case the taxpayer has furnished requisite salary, earnings specifics earned from prior employer(s) to the existing employer, a consolidated Form 16 and 12BA can be issued by the existing employer basis which an ITR can be filed. Otherwise, it may well lead to shortfall in TDS owing to duplication of slab advantage, deductions, exemptions offered by all employers. In that situation, further taxes due on the return along with applicable interest really should be paid ahead of filing the tax return.
9. Mandatory filing of an ITR in particular situations
Finance (No. 2) Act, 2019 mandated the ITR filing for pick people who fulfill particular specified criteria in the course of the relevant FY, even if such people are not mandated to file an ITR by virtue of possessing taxable earnings. They would be needed to furnish the identical if they enter higher-worth transactions in the course of the relevant FY as beneath:
i) Payment of electrical energy bills aggregating more than Rs 1 lakh
ii) Deposit of more than Rs 1 crore in aggregate in one or more existing bank accounts
iii) Spent more than Rs 2 lakh in aggregate on overseas travel for self or any other particular person.
10. Implications of non-filing of ITR by due date
The taxpayer may well not be capable to furnish the ITR by due date owing to numerous motives such as non-availability of relevant documents/ details, lack of time, individual exigencies, and so on. Regardless of the explanation, in case ITR filing deadline is not met, it may well lead to varied consequences beneath the Act such as levy of late filing charge, payment of interest on balance tax liability, ineligibility to carry forward particular losses, and so on.
To summarise, it would be prudent for taxpayers to assess their taxable earnings as per the provisions of the Act and also confirm all underlying documents/ details though computing the final tax payable / refundable as the case may well be. In performing so that really should take cognisance of aforesaid elements amongst other people, for filing their ITR accurately with out attracting any penal consequences.
(By Parizad Sirwalla, Partner and Head, Global Mobility Services – Tax, KPMG in India)