Income Tax
Personal Taxation Strategies for Your Financial Wellness
Home Income Tax
Personal Taxation Strategies for Your Financial Wellness
Direct Tax: Calculated directly on income, such as salary tax. Income tax falls under this category.
Indirect Tax: Indirectly charged on goods or services, now primarily governed by Goods and Services Tax (GST).
Applicable to anyone earning above a specified threshold, including income from various sources like salary, rent, interest, investments, or business profits. Rates are determined annually in the Union Budget.
A form filed with the Income Tax Department, serving as a statement of earned income. It facilitates calculating tax liability, scheduling payments, or claiming refunds. Taxpayers select the appropriate ITR form based on their income sources.
Anyone earning an income above a certain amount is subject to income tax. The income could be from salary, rent, and interest income from savings, income from mutual funds, sale of property or business or professional income. Income tax rates are decided at the start of the financial year in the Union Budget (in the Parliament of India). The tax paid on these incomes is called the income tax.
It is simply a Form to be filed with the Income Tax Department. A Form to be filed as a statement of income earned. It is arranged in such a way that calculating tax liability, scheduling tax payments or requesting refunds for the overpayment of taxes has been made convenient for the taxpayers. They must, first, determine the type of Income Tax Return (ITR) Form they need to fill before actually filing their Returns. Which Form is to be filled, depends on the income that the taxpayer earns. Its purpose is to report our income and taxes paid thereon to the government.
ITR – 1-(Sahaj): For individuals earning income from salaries, one house property, interest income, agriculture, other sources, etc.
ITR – 2: For Individuals and HUFs having income other than from profits and gains of business or profession. It may be from capital gain, lottery or foreign assets, etc.
ITR – 3: For individuals and HUF with income from profits of a business or profession.
ITR – 4(Sugam) For Individuals, HUFs and Firms (other than LLP) having presumptive business income tax returns. This is computed under sections 44AD, 44ADA or 44AE.
ITR – 5 Entities other than,- (i) individual, (ii) HUF, (iii) company and (iv) person filing Form ITR-7
ITR – 6 All companies except those that claim tax exemption as per Section 11.
ITR – 7 : Persons incl. companies required to furnish returns under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) only
Any company other than a company who is required to furnish a report in Form No. 3CEB under section 92E (i.e. other than covered in 2 below) – September 30 of the assessment year.
Any person (may be corporate/non-corporate) who is required to furnish a report in Form No. 3CEB under section 92E – November 30 of the assessment year.
Any person (other than a company) whose accounts are to be audited under the Income-tax Law or under any other law – September 30 of the assessment year.
A working partner of a firm whose accounts are required to be audited under this Act or under any other law – September 30 of the assessment year.
Any other assessee – July 31 of the assessment year.
Under-reporting: If it is found that the actual income exceeds the income declared by the person. Or when no return has been filed despite income exceeding the basic exemption limit. Penalty at 50% of tax payable on such under-reported income shall be payable. 200% of the tax will get if under-reporting results from misreporting of income.
Late Filing: As per Section 234F of the Income Tax Act, if you file after 31st July (it was extended to 31st August for AY 2019-2020) but before December, a penalty of Rs. 5000 will be levied. For returns filed after December, the penalty will be Rs. 10,000. However, to provide relief to small taxpayers, the IT department has stated a maximum penalty of only Rs. 1,000 will get levied. The condition is that your total income is less than Rs 5 lakh.
Penalty for Default: In case a demand notice u/s 156, has been issued to the taxpayer for payment of tax (other than notice for payment of advance tax). Then such amount, as per section 220(1), shall be paid within 30 days of the service of the notice at the place and to the person mentioned in the notice. If the taxpayer defaults in payment of any tax due, then apart from other penal provisions, he is treated as an assessee in default. For an assessee in default, the penalty will get levied as decided by the AO. However, the penalty cannot exceed the amount of arrears in tax. Before penalizing, the taxpayer is given a reasonable opportunity of being heard. No penalty is levied if the taxpayer can prove that the default due to a good and sufficient reason.
Fee for default in furnishing return of income
The taxpayer, who is required to furnish ITR u/s 139 failed to furnish return of income within due date as prescribed under section 139(1) then as per section 234F, he will be liable to pay penalty same as delayed filing.
NRI is not required to file Income tax return in India if he has no income arising in India i.e. an NRI is supposed to pay taxes on income earned in India during a particular financial year. So, any income that has been either received in India or accrued in India shall form part of taxable income of NRI.
Any NRI who earns more than Rs. 2,50,000 in a Financial Year is liable to e-file an income tax return in India. NRI’s need to e-file income tax returns for the following reasons: To claim a refund, To carry forward a loss
Note: Where in a financial year, the only income earned is from selling an asset where TDS has been deducted, the NRI is not required to e-file an income tax return for that year.
For NRI’s, July 31st is the last date to E-file income tax return in India.
NRI’s with tax liability exceeding INR 10,000 in a financial year, are required to pay advance tax. If advance tax payments are missed in a year then interest needs to be paid for that as mentioned under Section 234B and Section 234C.
NRIs can file either ITR 2 or ITR 3 (ITR 1 has been withdrawn for NRIs since AY 2018 – 19).
The types of income which are tax exempted are as under:
-Interest produced on FCNR/NRE account
-Interest earned on Government issued notified bonds and savings certificates.
-Long term capital gains from the listed equity – oriented mutual funds and equity shares
-Dividends earned from shared of domestic companies in India
-Capital gain exemptions via Sec 54, 54F and54EC.
To avoid double taxation, NRI’s can seek relief against the Double Tax Avoidance Agreement (DTAA) between the two countries. Doing so will make them pay tax either in the home country or in India.
Relief can be claimed by two methods:
Exemption method: where income is taxed only in one country and is exempted in another
Tax credit method: where the relief can be claimed in the country of residence.
Yes. You will be liable for capital gains tax in India upon sale of your flat. Further, the purchaser himself must deduct taxes on the quantum of gains you make. The rate of tax deduction for a long term asset would be 20% while taxes at slab rates would be deducted at source if the asset is a short term asset.
ITR return forms are attachment less forms and, hence, the taxpayer is not required to attach any document (like proof of investment, TDS certificates, etc.) along with the return of income (whether filed manually or filed electronically). However, these documents should be retained by the taxpayer and should be produced before the tax authorities when demanded in situations like assessment, inquiry, etc. As discussed above, no documents are to be attached along with the return of income, however, in case of a taxpayer who is required to furnish a report of audit under section 10(23C)(v), 10(23C)(vi), 10(23C)via), 10A, 10AA, 12A(1)(b), 44AB, 44DA, 50B, 80-IA, 80-IB, 80-IC, 80-ID, 80JJAA, 80LA, 92E, 115JB or 115VW or to give a notice under section 11(2)(a) shall furnish it electronically on or before the date of filing the return of income.
If you have sustained a loss in the financial year, which you propose to carry forward to the subsequent year for adjustment against subsequent year(s) positive income, you must make a claim of loss by filing your return before the due date.
Yes, if you have not furnished the return within the due date, you will have to pay interest on tax due. If the return is not filed up to the end of the assessment year, in addition to interest, a penalty of Rs. 5,000 shall be levied under section 271F.
Yes, if one could not file the return of income on or before the prescribed due date, then he can file a belated return. A belated return can be filed within a period of one year from the end of the assessment year or before completion of the assessment, whichever is earlier. Return filed after the prescribed due date is called as a belated return. However, w.e.f. 01-04-2017, belated income-tax return for the Assessment Year 2017-18 and onwards can be filed at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. A belated return attracts interest and penalty.
The excess tax can be claimed as refund by filing your Income-tax return. It will be refunded to you by crediting it in your bank account through ECS transfer. The department has been making efforts to settle refund claims at the earliest.
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