A Brief guide to Income tax returns filing - PY 2012-13 / FY 2013-14

Select your relevant form

 

ITR1

• Income from salary / pension
• Income from one house property (excluding losses brought forward from previous year)
• Income from other sources (excluding lottery, horse races)

ITR2 – ITR1 categories plus / or 

• Income from Capital Gains
• Income from other sources including Lottery, races 

ITR3 

• Income from partnership firms by way of salary, interest, bonus, commission includable under the head “Profits or Gains of business or profession”

ITR4

• Individual or HUF who is carrying on a proprietary business or profession

 ITR4S – ITR1 categories plus / or 

• Income from business computed under special provisions of section 44AD & 44AE of income tax act (presumptive taxation)

ITR5 

• Returns by Firms, Association of Persons, Body of Individuals

ITR6

• Returns by companies 

ITR7

• Returns under section 139(4A) , 139(4B), 139(4C) & 139(4D) – belated returns but before completion of assessment year

Compulsory E-filing of Returns with or without digital signature – Previous Year 12-13 / Assessment Year 13-14

ITR1, ITR2, ITR3, ITR4, ITR4S, ITR5 is mandated for compulsory e-filing (with or without digital signature) if income exceed Rs.5 lacs.  Income below Rs.5 lacs can go in for manual filing.

 

Compulsory E-filing of Returns with digital signature – Previous Year 12-13 / Assessment Year 13-14

 

ITR4 & ITR5 is mandatory for e-filing with digital signature if section 44AB is applicable (audit of accounts)

 

ITR6 is mandatory for e-filing with digital signature

 

How to file returns

Visit site https://incometaxindiaefiling.gov.in/ and download the relevant ITR in excel format.

 

View your 26AS following this link https://services.tdscpc.gov.in/serv/tapn/welcome26AS.xhtml. If you have not registered in income tax website, there will be a promt to register using your PAN.  After registration or login this site provides you all details of your tax deducted by your employer or any other person like your banker on interest income. Also it provides details of advance tax paid & details of high value transactions reported in your name. Cross check the tax deducted & advance tax, ensure that these figures are reflected in your ITR returns. If there is a mismatch then there will be query from income tax as to the mismatch. If there are any discrepancies take it up immediately with the TDS deducing authorities to correct if discrepancy is in TDS or take it up with your banker if discrepancy is in advance tax payment.

Once you have filled in the ITR, convert into an XML file and go to site https://incometaxindiaefiling.gov.in/e-Filing/MyAccount/UploadReturnsHome.html?ID=1707942105  to upload your returns. If you would wish to digitally sign your returns register your token in the “Profile settings” menu or follow this link https://incometaxindiaefiling.gov.in/e-Filing/MyAccount/UpdateDscDetailsLink.html?ID=579614307.  Upload the returns.

 

Download the acknowledgement and forward it to CPC Bengaluru, if you have digitally signed the return you need not forward to CPC Bengaluru.

Income Tax Returns from Assessment Year 2012-13 - Mandatory e-filing

From the Assessment year 2012-13 the income tax department has made e-filing compulsory for the following categories of tax payers vide Notification number S.O.626(E), dated 28.3.2012.  

1. an Individual or a HUF whose total income is more than Rs.10 lacs
2. an Individual or a HUF, who is a resident, having assets (including financial interest in any entity) located outside India or signing authority outside India and required to furnish tax returns under ITR2 or ITR3 or ITR4

CBDT has further clarified under its Press Release No.402/92/2006-MC (12 or 2012) dated 2.7.2012 that though e-returns are mandatory for the above 2 categories, digital signature is not mandatory.  The assesses can transmit the data in the return electronically and thereafter submit for verification to ITR-V to CPC in Bangalore by ordinary post within 120 days.

 

To clarify 

• ITR1 is for tax payers with 
• salary or pension income
• Rental income from one property
• capital gains that are tax free
• Interest from interest and other sources
• ITR2 is for tax payers with
• salary or pension income
• Rental income from more than one prpoerty
• Any Capital losses or Capital gains
• Income from other sources
• Foreign assets
• ITR3 is for tax payers with 
• Interest from salary, bonus, commission or remuneration
• Capital gains
• More than one house rental income with carried forward losses
• Income from other sources
• ITR4 is for tax payers with
• Income from business or profession
• Income from other sources
• Foreign assets
• ITR5 is for Firms
• ITR6 is for Companies

E-filing of income tax returns can be done through website of the CBDT @ https://incometaxindiaefiling.gov.in/portal/index.jsp.  One has to login using their PAN number and then download the relevant ITR.  Once the ITR is completed there is a Submit Return icon available through which online return can be filled and ITR-V can be generated to forward to CPC in Bangalore.

194LLA - TDS on purchase of immovable property

From 1.10.2012, if you are buying property more than Rs.50 lacs in urban areas or Rs.20 lacs in other areas be prepared to deduct income tax @ 1% and remit the same to Income tax authorities.  This is one more tax procedure proposed to be introduced to be complied by the buyer of property.

Effective 1st October, 2012 a new section is proposed to be introduced in Income Tax Act, 1961 - 194LLA under which, TDS (Tax deduction at Source) should be deducted at the rate of 1% on all payments made for transfer of property other than agricultural land if the value of the property exceed Rs.50 lacs in urban areas and Rs.20 lacs if the property is situated in any other areas.

The buyer has to produce to the registrar the tax payment challan equivalent to 1% of the transaction value to get the land registered.  This the Government claims will help rein in information on real estate transactions immediately and will help Government curb black money as the Government feels real estate is a major area which generates black money.

Question is will this new levy help achieve the Government objective of curbing black money?  The problem with India is we are extremely good in drafting laws, debating them and enacting them.  But the major point is whether we are implementing the law as it should be implemented?  The answer is a big no!!  What is the Government doing with the data it gets from banks / registrars on large value transactions?  This TDS is more of a duplication of information to the Government.  This new TDS section will unnecessarily complicate the already complex tax laws we have in our country.

"Come on India" let us move forward with tax reforms these type of tinkering legislations lead to a vicious circle leading us nowhere.  Let us not waste time discussing and implementing 194LLA, but spend that time trying to implement GST / DTA and other landmark legislations

Perquisites Valuation for Salaried Employees

Section 17(2) of the income tax act, 1961 defines Perquisites and it includes within its gambit a variety of perquisites provided by the employer.   This articles provides an insight into the valuation of these perquisites.

Provision of Unfurnished Accommodation

If the employee is employed with Central or State Government the valuation of accommodation is

• licence fee determined by the concerned government
• Less rent actually paid by the employee

If the employee is employed by other "employers" then

1. if the accommodation is owned by the employer then the valuation
• is 15% of salary in cities having population exceeding 25 lacs as per 2001 census or
• is 10% of salary in cities having population exceeding 10 lacs but less than 25 lacs as per 2001 census or
• is 7.5% of salary in other places
2. if the accommodation is leased / rented by the employer then the valuation
• is 15% of salary or
• actual amount of lease rent payable by the employer

         whichever is lower, and reduced by any amount of rent paid by the employee

If accommodation is provided in a hotel for a period exceeding 15 days on transfer from one place to another then valuation is

• 24% of annual salary or
• actual charges payable to the hotel as reduced by the amount paid by the employee

         whichever is lower

Provision of furnished Accommodation

Perquisite valuation will be in addition to the valuation under "Provision of unfurnished Accommodation".  To the said valuation will be added

1. 10% of the cost of furniture, appliance and equipments or
2. actual cost of rental of these furniture, appliance and equipments

    less any amount paid by the employee

Personal Attendants

Value of services paid by the employer for provision of

1. Sweeper
2. Watchman
3. Gardener

will be treated as perquisite.  Actual cost of payment by the employer will be taken as perquisite less any amount paid by the employee

Gas, Electricity & Water

Actual cost (less any amount paid by the employee) of provision of gas, electricity or water to employee's household consumption will be treated as perquisite

Free or Concessional Education

Cost of free education is a perquisite less any amount paid by the employee.  If the employer runs the educational institution then valuation will be based on cost of education in a similar institution in a nearby locality.

Interest free or concessional loans

Any loan provided by the employer, in excess of Rs.20,000, either at NIL rate of interest or reduced rate of interest then perquisite valuation will be

• Difference in interest rate charged by State Bank of India for similar types of loans and interest payable by the employee.  If for example State Bank of India charges 16% for personal loan and the employer extends to the employee personal loan at 2% interest.  Then perquisite value will be equivalent to 14% of the loan amount

However loan extended for any medical purpose does not get covered under this clause provided the employer does not reimburse the same under any medical insurance scheme

Use of Assets

If any assets of the employer, except computer & laptop, is used by the employee then perquisite valuation will be 10% of the value of these assets less any amount paid by the employee

Transfer of Assets

Any asset of the employer transferred to the employee is a perquisite, the value of perquisite is as follows

1. Motor Car - Original value less Depreciation at the rate of 20% in Written down value method for every completed year of usage less any amount paid by the employee
2. Computer or any other Electronic Gadgets - Original value less Depreciation at the rate of 50% in Written down value method for every completed year of usage less any amount paid by the employee
3. Any other asset - Original value less Depreciation at the rate of 10% in Straight line value method for every completed year of usage less any amount paid by the employee

The above perquisites valuation can change depending on rules prevalent at various times, you are requested to check the same before proceeding for any decisions

Salary TDS Provisions and Proofs to be given to Employer

Objective of this article is to explain various provisions tax savings / planning under income tax for salaried persons and documents they need to provide to their employers to enable exemptions / tax deductions by the employer

Multiple Employments - Section 192(2)

An employee who is employed with more than one employer during a financial year should provide to his present employer details of salary earned, tax deduted during his previous employment. 

Documents to be submitted to employer

1. Duly filled in Form 12B duly signed by the employee
2. If possible, Form 16 provided by the previous employer till the time the employee was in service with the previous employer (as additional proof

Loss from House Property (section 22 - 24) - (Let out Property)

If an house is let out (not occupied by the employee) then exemption can be claimed under this section if there is a loss from house property income.  The formula for calculating loss from house income is as follows (an example of Rs.10,000 per month rent, interest paid during the year is Rs.2,55,000 & municipal / water taxes paid is Rs.9,675)

                Actual Rent Received or Annual Value                                            1,20,000
   Less :  30%  of Actual Rent received or Annual Value                                    36,000
   Less :  Interest on capital borrowed for purposes of construction /
                                                                                           repair                      2,55,000
   Less :  Municipal / water taxes paid for the house                                             9,675

                Loss Under House Property                                                              1,80,675

This loss will be recognised by the employer and taken for tax deduction accordingly.

Documents to be submitted to employer

1. Details of full address of the property
2. Details of loan along with copy of loan / interest payment certificate from the bank / financial institution from which loan is availed
3. Details of Annual rent / municipal taxes (copy of receipts)
4. A self signed declaration with the following words: I, …………………. (name of the assesse), do declare that what is stated above is true to the best of my information and belief.  

Interest on Self occupied house

If housing loan is taken on or after 1.4.1999 for construction or acquiring of a residential unit then a deduction upto maximum of Rs.1,50,000 is allowable on interest on such housing loan.   This is not available in case loan is taken for purpose of repair or renovation of an existing residential house.  The following points are worth noting

1. This deduction is available only after completion certificate is obtained from the builder and regular EMI is commenced by the financial institution
2. All Pre-EMI's can be shown as deduction in 5 equal instalments (5 years) commencing from the year in which the construction is completed

Documents to be submitted to employer

1. Details of loan along with copy of loan / interest payment certificate from the bank / financial institution from which loan is availed - clearly detailing the amount of interest paid on the housing loan

Medical Allowance - Section 17(2)(v)

Medical expenditure incurred by an employee for himself or any member of his family (who are his dependents) shall be exempted to a maximum extent of Rs.15,000 in a year

Documents to be submitted to employer

1. Medical bills pertaining to the relevant financial year and in the name of the employee or any member of the family (who are dependents)

Leave Travel Allowance - Section 10(5) - Rule 2B

 

Expenses incurred on travel for proceeding on leave to any place in India is exempt provided employer pays him a specific allowance to this regard or can allocate a portion of the salary to this allowance.  The following are the conditions to avail of this exemptions from income tax.

1. Cost of the travel is restricted to Economy Air Fare by the shortest route
2. If travelled by any other mode than Air, then exemption is restricted to cost of First Class Air Conditioned fair by the shortest route
3. The exemption can be claimed in respect of two journeys in a block of four years
4. This exemption can be claimed only for expenses incurred on family.  Family is defined as Spouse, Children, Parents, Brothers and Sisters wholly dependent of the individual

Documents to be submitted to employer

1. Proof of Travel - Tickets etc
2. Proof of availing leave to prove that the employee travelled
3. If travel by Car / Taxi then as a corroborative evidence Toll Bills, Parking bills etc.

House Rent Allowance - Section 10(13A) - Rule 2A

HRA exemption is restricted to the least of the following

1. Actual HRA Received by the employee
2. 40% of salary - Salary means Basic + Dearness allowance.  (50% of salary if the rented accommodation is situated in Delhi, Mumbai, Kolkata or Chennai)
3. Actual Rent Paid in excess of 10% of salary (Salary means Basic + Dearness Allowance)

Documents to be provided to employer

1. Proof of Rent Paid - Rent Receipt (not required to provide if monthly rent is less than Rs,3,000)
2. Rent receipt should be stamped with revenue stamp and duly signed by the landlord
3. If rent exceeds Rs.1,80,000 per annum then the PAN number of the landlord should be mentioned in the rent receipt.  If the landlord does not have a PAN then a declaration to the effect that no PAN number is available should be taken from the landlord along with the name and address of the landlord

Deductions under Chapter VIA

Deductions under Section 80C

Exemption under 80C is restricted to Rs.1,00,000 and it covers the following.

Payment towards insurance Premium

Payment of insurance premium (including ULIP's) to keep in force an insurance to cover the life of the individual or spouse of the individual or any dependent child of the individual.

It may be clarified that the amount of premium so allowed on the insurance policy is subject to a maximum limit of 20% of the actual sum assured (ie) if sum assured value for a policy is Rs.2,00,000 then the premium allowed per year under section 80C for this policy will be maximum Rs.40,000 or actual premium paid.

Documents to be submitted to employer

1. Receipt of premium paid
2. Proof of sum assured (if available in Premium receipt above not required seperately)

Contribution to Public Providend Fund

Contribution to any Providend fund set up by the Central Government and notified accordingly. 

Documents to be submitted to employer

1. Receipt of contribution made
2. In case of Passbook entry copy is submitted, to submit originals for verification and return

Deposit in Savings Certificates

Deposit in savings certificates as defined under section 2(c) of the Government Saving Certificate Act, 1959.  Currently the Government has notified National Savings Certificate VIIIth issue.

Documents to be submitted to employer

1. Copy of the savings certificate in the name of the individual or spouse or children of the individual who are dependent on the individual

Deposit in Mutual Funds

Deposit in units of any mutual fund referred to in Clause 23(D) of section 10.  The Centre has notified that the deposit should be made in an "Equity Linked Savings Scheme"

Documents to be submitted to employer

1. Proof of investment in designated mutual funds

Repayment of loan borrowed for purpose of construction of residential house property

Deduction will be allowed on repayment of housing loan availed by an employee from any bank or reputed financial institution.  For the purpose of this deduction expenses incurred on Stamp Duty, registration fees and other expenses incurred on transfer of property is also exempt in the year of transfer.  Note - no other expenses will be allowed for deduction under this clause regarding house property.

Documents to be submitted to employer

1. Copy of payment certificate from the financial institution clearly mentioning the principal and interest repayments.

Tuition Fees of Children

Tuition Fees for any two children incurred whether at the time of admission or thereafter, paid to any university, college, school or other educational institution situated in India for the purpose of full time education.  Full time education includes play-school activities, pre-nursery and nursery classes.  Also note payment in nature of development fees, donations or capitation fees or fees of similar nature are not allowed as exemption.

Documents to be submitted to employer

1. Children's fees receipts - copy

Fixed Term Deposit

Investment in a term deposit for a fixed period of not less than 5 years with a scheduled bank.  Please take care to invest only in banks and schemes of the banks which are covered under "Bank Term Deposit Scheme, 2006"

Documents to be submitted to employer

1. Copy of the deposit receipt

Other deductions (more than Rs.1,00,000

Contribution to New Pension Scheme - Section 80CCD

Contribution made by an Employer into the New Pension Scheme (NPS) is exempt subject to a maximum of 10% of employee's salary (Salary defined to include Basic + Dearness Allowance).  The Employer should deduct from the employee salary NPS and deposit the same in Tier 1 account of the employee to enable the employee to avail this benefit.  This benefit overrules the limit of Rs.1,00,000 of section 80CCE. 

Document to be provided to employer

1. The law here is that employer should deduct and pay into NPS account, so proof is available with the employer himself similar to Providend Fund (PF) deduction

Contribution to Infrastructure bond - Section 80CCF

This section is extended for financial year 2011-12 and may not be continued for subsequent years.  Under this section investment of maximum Rs.20,000 in specified long term infrastructure bonds as notified by Central Government is exempted. 

Document to be provided to employer

1. Copy of infrastructure bond
2. If demat account copy of transaction statement of demat account

Medical Insurance Premium - Section 80D

No Cash Payment is allowed for this premium (ie) payment for medical insurance premium should be by "other than cash" mode to avail exemption under this section.  The deduction allowed for medical insurance premium is 2 fold.

1. Premium paid on medical insurance of family of assessee for an amount of Rs.15,000
2. Premium paid on medical insurance of parents of assessee for an amount of Rs.15,000.  If the parents are senior citizens (more than 60 years) then the exemption allowed is maximum of Rs.20,000 instead of Rs.15,000.

Document to be provided to employer

1. Copy of medical insurance premium paid
2. Copy of policy to prove that it is a Health / Mediclaim policy

Medical treatment of a dependent with disability - Section 80DD

Deduction is provided for Rs.50,000 towards medical treatment, and if treatment is for persons with severe disability then deduction is provided for Rs.1,00,000. 

Documents to be provided to employer

1. Certificate from medical authority in prescribed form

Repayment of Interest on loan taken for higher education - Section 80E

Deduction is allowed for interest on loan taken for purposes of pursuing higher education from any financial institution or Charitable institution.  Deduction is allowed for the individual's education loan or loan for spouse or dependent Children or for a student for whom the assessee is a legal guardian.  This deduction is allowed for 7 years from the year in which the loan is availed or until the loan is fully repaid whichever is earlier. 

Documents to be provided to employer

1. Details of loan and clear specification of interest on the loan

Donations - Section 80G

Generally no deductions should be provided by employer in deducting TDS from salary for purposes of donations under section 80G, the assessee should claim the same in his return.  Only those donations which are deducted by employer for donations and paid by the employer to Prime Minister's Relief fund, the Chief Minister's Relief Fund or the Lieutenant Governor's Relief fund should be deducted from salary

Important Note

The above is only a illustrative list and may not cover all scenario's.  There may be certain instances when the above scenarios may be interpreted differently by taxation authorities.  Please treat this article as a basic guide and seek expert advise for taxation purposes.

Section 206AA - Compulsory quoting of PAN

 

From 1.4.2010 income tax act has inserted section 206AA which makes furnishing of PAN compulsory for all employees in case they are liable for payment of TDS. If the employee fails to produce PAN then the TDS for the employee will be deducted at the higher of the following rate

1. at the rate specified in income tax act
2. at the rate or rates in force
3. at the rate of 20% 

In short, if PAN is not obtained tax will be calculated @ the minimum rate of 20% or higher rate as per tax calculation.  It is advisable to obtain PAN numbers immediately by all employees.

 

Time of Payment of TDS

Question

Our company had deducted TDS on 31/03/2008 and deposited the same on 31/05/2008.The income tax department issued a demand notice for interest on delayed payment. Is our company  liable to deposit the interest? Sir, guide me on this matter

Answer

As per Rule 30(1)(b)(i)(1) of Income Tax Rules, 1962 TDS can be paid to Government account within 2 months of the expiration of the month in which the credit has been made provided in that month the accounts of the company is being made. (ie) if your accounts are finalised as on 31.3.2008 then you can remit TDS within 2 months from date of such closure which is 31.5.2008. So your payment seems to be in order.

This rule has been amended since 1.4.2010 and Rule 30(2)(a) states that payment has to be made to Government on or before 30th day of April where the income or amount is credited or paid in the month of March.

Refund of excess TDS paid under Section 195

CBDT has issued circular number 7/2011 dated 27.9.2011 which seeks to amend circular number 7/2007 dated 23.10.2007.  If a deductor has deducted tax as per Double Taxation Avoidance Agreement (DTAA) and this rate of tax is higher than that prescribed under the Income Tax Act then the dedcutor can claim the difference between the lower income tax rate and DTAA rate as refund.  This amendment is made to avoid hardship to the resident deductor where deduction is made under a higher rate of DTAA

Nil TDS on Transport Charges (Section 194C) & TDS Returns

With effect from 1.10.2009, Finance Act (2) of 2009 has provided that no TDS needs to be deducted on payments made to Transporters who provide service of Plying, hiring or leasing goods carriage.  The Caveat here is that these service providers should provide their PAN number to the deductor, if not deduction will be made at 20%.

Even though TDS is not deducted on transport charges these transport charges has to be furnished in the Quarterly eTDS return with tax deduction shown as "NIL".

To quote the words in the Finance Act (2) of 2009

"(6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum.

(7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed."

There are instances where the transport charges are not forming part of the quarterly e-returns which is a violation, so please ensure that your e-returns capture the same