The tax authority has introduced a new set of forms for filing returns; it is important to fill the correct one
Pradeep Gaur/Mint
It is that time of the year when you get your Form 16 from your employer and gear up to file income tax returns (ITR) for the financial year gone by. This year the government has come out with a new ITR form. Also there is more to disclose while filing returns—you need to provide your passport number and details of all bank accounts, among others. “This time when you file returns, you will have to pay very close attention to the information you submit such as disclosing all bank account details and details of your foreign assets. Ordinarily resident taxpayers need to be careful as they are required to provide detailed information about their overseas income or assets in view of enlargement of the scope of reporting in schedule FA (foreign assets) to Form ITR-2,” said Kuldip Kumar, partner and leader-personal tax, PwC.
Despite all the changes in the ITR forms and details that you need to submit, you can still file ITR on your own. Mint Money takes you through the details of who needs to file returns, documents required, how to pick the right form and how to file it.
Who needs to file return?
Any individual who has a taxable income should file tax return. Currently, if you are below the age of 60 and have an annual income of up to Rs.2.5 lakh, you are exempt from tax. Any income above Rs.2.5 lakh is taxable. If you have taxable income, you have to file the return irrespective of whether you have paid taxes or not. “As per section 139 of the Income-tax Act, 1961, an individual would be required to file the India tax return in the following cases—if the total income (i.e., before claiming any specified deductions under chapter VIA of the Act) is more than the basic exemption limit prescribed for a particular financial year; individuals qualifying as ordinarily resident of India and hold any assets (including financial interest in any entity) located outside India or signing authority in any account located outside India or individual who has incurred loss under the head income from house property, business profession, capital gains or other sources, has to file a tax return in order to carry forward and set-off of such losses in the subsequent financial years,” said Parizad Sirwalla, partner (tax), KPMG. Remember that tax slab varies for senior and very senior citizens. “In case of an individual who is of the age of 60 years or more at any time during the financial year, the limit is set at Rs.3 lakh a year, while in case of an individual above the age of 80 years, the limit is set at Rs.5 lakh,” said Rakesh Nangia, managing partner, Nangia and Co.
Identify source of income
Every income that you earn has been defined under the income tax law for tax purposes. Depending on the source of income, the I-T department has structured ITR forms. In order to pick the right form to file returns, you need to identify income as defined by the I-T department.
“The source of income can be identified based on documents such as bank statements, Form 16/Form 16A, Form 26AS and overseas tax return,” said Sirwalla. For instance, as per I-T law, salary income is salary received from employer, pension, gratuity, perquisite and profit in lieu of salary. Any rental income on let out house property or deemed let out property (in case of more than one house property) is known as income from house property. Then there are income from capital gains, business income and income from other sources. “Income from profit or gains of business or profession are those income from trade and commerce or speculation income. Income from capital gains is income from sale or transfer of shares, mutual fund units and movable or immovable property. Income from other sources is any income earned in the form of director fees, dividend income, interest income (except banking business), lottery income and gains from horse race,” said Sirwalla.
Checklist of documents
Whether you file your income tax return on your own or take help from a chartered accountant, you need to collect all important documents for filing return. You don’t have to submit any of the documents while filing returns. However, you will have to keep it handy for filling the ITR forms. In case you attach any of the documents with your ITR form, the I-T department will detach the additional document and send it back to you. “The list is long, however, the basic documents you need to keep handy are Form 16, Aadhaar details, passport number, details of all bank accounts such as Indian Financial System Code (IFSC) and account number, investment proofs, income proofs, evidence of rent and details of income of minor if clubbed in your ITR,” said Homi B. Mistry, partner, Deloitte Haskins & Sells LLP. (See table)
This year, the number of disclosure of your personal details has increased compared with last year for filing returns. For instance, if you have an Aadhaar card number, you have to provide the details if you are filing ITR-1, ITR-2, ITR-2A or ITR-4S. However, the disclosure of Aadhaar details is optional. “Aadhaar number may be used for electronic verification code system and in such a case, signed ITR-V is not required to be sent to the Central Processing Centre at Bengaluru,” said Kumar. Another example is disclosure of passport number, if available. You have to disclose passport number if you are filling ITR-2 or ITR-2A. This year you also have to disclose details of all the bank accounts excluding accounts that have been non-operational for over three years held in India at any time during the previous year if you are filling ITR-1, ITR-2, ITR-2A or ITR-4S. “The details include—total number of accounts held, IFSC of the bank, name of the bank, account number, and indicate the bank account in which the taxpayer prefers to get the refund,” said Kumar. You don’t have to disclose your bank balance.
Picking the right form
Once you have identified your income and have pulled out all the necessary documents for filing returns, the next step is to identify the right ITR form. You should report the income and tax payment details for the previous financial year in appropriate tax return forms. This year the government has introduced a new form and has also reworked the existing one. Here is a look at the ITR forms that individuals have to fill.
ITR-1: ITR-1, also known as Sahaj, is to be filled by individuals whose total income for the assessment year 2015-16 includes income from salary or pension or income from one house property excluding cases where loss is brought forward from previous years, or income from other sources excluding winning from lottery and income from race horses. Unlike earlier, individuals having exempt income, from say dividend income or interest income from provident fund, of more than Rs.5,000 can use ITR-1.
However, individuals having agricultural income exceeding Rs.5,000 will still not be able to use ITR-1.
“ITR-1 cannot be used if agricultural income exceeds Rs.5,000; if there is income from business or profession; in case of income from sources outside India; relief is claimed under section 90 or section 91 of the Act read with double taxation avoidance agreement (DTAA) or having assets (including financial interest in any entity) outside India or signing authority in any account located outside India and in case of income from capital gains,” said Sirwalla.
ITR-2: This form has to be filled by individuals and Hindu Undivided Families (HUFs) having income from more than one house property and capital gains from stocks or mutual funds. “This return form can be used by individuals and HUFs whose total income includes income from salary or pension, income from house property, income from capital gains, income from other sources including winning from lottery and income from race horses, and individuals who qualify as ordinarily resident in India having overseas income or assets,” said Kumar. Individuals and HUFs that have business income should not use ITR-2.
ITR-2A: This form has been introduced this year. ITR-2A is to be filled by those who have salary income and income from more than one house property but do not have any capital gains accruing to them or any foreign asset. “If you have income from salary or pension, income from house property (even if more than one house property, brought forward loss from earlier financial years or carry forward loss to subsequent financial year), income from other sources (including lottery income, gains or loss from horse races) you can use this form,” said Sirwalla. You can’t use the form if you have income from business or profession, or income from sources outside India or relief is claimed under section 90 or section 91 of the Act read with DTAA or having assets (including financial interest in any entity) outside India or signing authority in any account located outside India or income from capital gains.
ITR-4S (Sugam): If you have income from business on presumptive basis and salary or pension, income from one house property except loss is brought forward from earlier financial years, income from other sources excluding lottery income, gains or loss from race horses, you can use ITR-4S (Sugam). This form can’t be used if you have income from speculative business, income from sources outside India, relief is claimed under section 90 or section 91 of the Act read with DTAA or have assets (including financial interest in any entity) outside India or signing authority in any account located outside India or income from capital gains.
Conclusion
Do remember that the deadline for filing return this year is 31 August. If you have income over Rs.5 lakh, it is mandatory to e-file. Read more about the process of filing tax return online and how to do it without mistakes further in our package.
