For folks [not subject to tax audit provisions under Income-Tax Act, 1961 (‘the Act’)] the Income Tax Return filing deadline for Financial Year 2020-21 has now been extended to 31 December 2021. There have been important adjustments in the tax filing procedure this year due to launch of a new earnings-tax portal. Thus, it is pertinent to select the proper ITR kind and fill in the right facts when filing the ITR.
Who really should file an ITR
An person is obligated to file an ITR in the prescribed kind if his/her gross taxable earnings [calculated before eligible exemption available for long-term capital gains on listed securities upto Rs 1 lakh and other deductions under Chapter VI-A of the Act] in the course of a distinct FY exceeds the maximum quantity not chargeable to tax.
For FY 2020-21, total earnings up to Rs 2.5 lakh is not topic to tax for an person. Such threshold earnings for a resident senior citizen (age of 60 years or more) and resident super senior citizens (age of 80 years or more) is Rs 3 lakh and Rs 5 lakh, respectively.
Further, an person whose earnings is not chargeable to tax, but fulfills one or more situations specified beneath is obligated to furnish his return of earnings.
i) Deposit of quantity or aggregates of quantity exceeding Rs 1 crore in one or more existing accounts
ii) Incurred expenditure of an quantity or aggregate of quantity exceeding Rs 2 lakh for travel to a foreign nation for oneself or any other particular person
iii) Incurred expenditure of quantity or aggregate of quantity exceeding Rs 1 lakh on consumption of electrical energy.
Computation of earnings and taxes
Firstly, earnings beneath each and every head of earnings wants to be computed separately as per the respective provisions of the mentioned earnings head. Thereafter brought forward/existing year losses really should be set off to figure out the gross total earnings.
Once the gross total earnings is determined, deductions readily available beneath chapter VI-A of the Act (such as Section 80C in respect of specified investments/expenditure, Section 80D for healthcare insurance coverage premium, and so forth.) can be claimed to arrive at total taxable earnings. On such taxable earnings, applicable slab prices of tax really should be applied to compute the total tax liability (net of rebate beneath Section 87A or relief beneath Section 89 of the Act, if applicable).
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. One might evaluate involving such new tax regime and the old tax regime and proceed with whichever is helpful. Any taxes due on the tax return just after claiming credit of prepaid taxes (taxes deducted at supply and advance taxes paid in the course of the year) and foreign tax credit of taxes paid outdoors India really should be paid (like applicable interest, if any) prior to filing the tax return.
ITR types
The tax return types notified for FY 2020-21 applicable to folks are:
Broad overview of how to file an ITR
Every person has to mandatorily file his/her return electronically except super senior citizens filing ITR-1.
Broadly speaking, the procedure for filing the tax return electronically is as beneath:
1. Taxpayer really should register (if not currently carried out) and login into the earnings-tax e-filing portal.
2. Retrieve and confirm on the net tax credit statement (Form 26AS) in help of taxes deducted at supply by the employer/any other deductor, advance taxes paid in the course of the year and any other info as relevant.
3. Prepare computation of earnings (like claiming exemptions and deductions) and taxes. Based on the exact same, spend the balance taxes payable, if any, as self-assessment taxes applying challan no. 280.
4. Taxpayers claiming foreign tax relief really should prefill the facts in Form 67 and submit along with supporting documents. Such kind is expected to be verified on the net prior to filing ITR.
5. Taxpayers obtaining earnings from business enterprise/ profession and deciding upon to opt for the new optional tax regime have to also file Form 10IE on the net.
6. Tax return can be ready and submitted by way of an on the net functionality readily available on the earnings tax e-filing portal. Alternatively, one can download prefilled ITR and fill the prescribed utility of the applicable earnings tax return kind offline, create an xml file and upload the exact same on e-filing portal. It is advised to verify the info in prefilled ITR and make vital additions of earnings not reported therein in the tax return.
7. While filling the aforesaid types (either in on the net or offline mode), the taxpayer really should also adhere to the prescribed disclosure needs like facts of directorships held, unlisted shares, Schedule AL for facts of assets and liabilities held in India, Schedule FA relevant for ROR taxpayers for reporting foreign bank accounts, economic interest in an entity, equity/debt shares and other assets facts, and so forth.
8. Post uploading the return, an acknowledgement of the tax return filed (Form ITR-V) would be generated which can be validated either on the net (by way of Aadhaar OTP, net banking and so forth.) or by way of physical signatures inside the cribed period to comprehensive the filing procedure.
In summary, when the whole ITR filing procedure has turn out to be virtually electronic, diligence would need to have to be exercised by the taxpayer to use the right types, report the right facts of earnings/deductions, and so forth. as any non-reporting/ mis-reporting has varied consequences beneath the Act.
(By Parizad Sirwalla, Partner and Head, Global Mobility Services-Tax, KPMG in India)