Friday, January 4, 2008

FAQs on Filing Returns

What is return of income?

The return of income is a statement furnished by an assessee, stating the total amount of income earned by him during the previous year.

The provisions for voluntary return income fall under Sections 139(1), (4A), (4B), 4(C).
Who are the persons under statutory obligation to file a return of income?

*Company

*Firm

*A person, other than a company

*A person in receipt of income, derived from property held under a trust for religious or charitable purposes.

*Chief Executive Officer of every political party

*Scientific research association, news agency, association/institution for control/supervision of a profession, institution for development of khadi and village industries, fund institution educational/medical institution, trade union (Applicable from Assessment Year 2003-2004)

What is the minimum income that attracts the provisions of filing return of income?

*For a company - any income or loss

*For a partnership firm - any income or loss.

*For a person other than company and firm - income in excess of the amount not chargeable to tax.

*For a person in receipt of income derived from property held under a trust for religious or charitable purposes - if the income, without giving exemption under Section 11 or 12, exceeds the maximum amount not chargeable to tax.

*For a Chief Executive Officer of every political party - if the income (without giving exemption under Section 13A) exceeds the maximum amount not chargeable to tax.

*For a scientific research association, news agency, association/institution for control/supervision of a profession, institution for development of khadi and village industries, fund institution, educational/medical institution, trade union - if the income, without giving exemption under Section 10, exceeds the maximum amount not chargeable to tax.

Is it obligatory to file a return if the income is lower than the exemption limit? What are the conditions that a person must fulfill when it comes to filing a return?

As per the first proviso to Section 139(1), when income is less than the exemption limit or equal to the amount of exemption unit and it is a person (other than a company, political party or charitable trust) who does not furnish return under Section 139 (1) and resides in a specified area, shall submit his return of income in form 2C, must file a return if he fulfils any one of the following conditions at any time during the previous year:

1.Ownership/lease of a motor vehicle.

2.Occupation of any category or categories of immovable property as may be specified by the board by notification whether by way of ownership or tenancy or otherwise.

3.Incurred expenditure on himself or any other person on travel to a foreign country other than Bangladesh, Bhutan, Maldives, Nepal, Pakistan or Sri Lanka (not being a travel to Saudi Arabia for Hajj or travel to China on pilgrimage to Kailash Mansarovar).

4.Subscription of a cellular telephone (not being a wireless in local loop telephone).

5.Holder of a credit card (not being an add-on card or not being a Kisan credit card, issued by a bank or an institution).

6.Member of a club where entrance fees charged is Rs 25,000 or more.

7.Expenditure of Rs 50,000 or more during the previous year towards consumption of electricity.

The above provision shall not apply to such persons who are notified by the government.

The government has specified that the above provision is not applicable in the case of a Non-Resident Indian (NRI).

Also an individual, who is at least 65 years of age and not engaged in any business /profession, is not subject to conditions 2 or 4.

A list of return forms to be filled by different assessees:

Assessees Form No
For companies, other than those claiming exemption under Section 11 1
For assesses (other than companies and those claiming exemption under Section 11) whose total income includes income or loss under the head "profits and gains of business or profession" 2 or 2D
For a person who is required to file a return under proviso to Section 139(1) 2C
For assesses (other than companies and those deriving income from property held for charitable or religious purposes, claiming exemption under Section 11) whose total income does not include income or loss under the head "profits and gains of business or profession" 3 or 3D
For Assessees being resident individuals or resident Hindu Undivided Families not having any income/loss from a business or a profession or capital gains or agricultural income. 3 or 2D or 2E (Naya Saral)
Assessee being a resident individual who satisfied the following conditions:

*Income from salary before giving deductions under Section 16 does not exceed Rs 150,000.
*The taxpayer does not have any income/loss from business/profession capital gain or agricultural income.
*He is not in receipt of income from which tax has been deducted by a person other than his employer.


Where the assessee is a person other than a company:

*Where the accounts of the assesee are required to be audited under any law
*Where the assessee is a working partner in a firm whose accounts are required to be audited under any law
*Where the assessee is covered by the first proviso to Section 139(1)

31st October
In any other case 31st July

What is the procedure to file returns?

Section 139 of the IT Act deals with the filing of returns of income. The following are the provisions of this Section:

1.The Act requires the assessee to furnish the particulars of income exempt from tax, assets of prescribed nature, value and belonging to him, his bank account and credit card held by him, expenditure exceeding the prescribed limits and such other prescribed outgoings.

2. It is also required of the assessee to furnish the particulars of the location and style of the principal place of business or profession and all branches thereof, the names, addresses and shares of his partners or fellow members in the firm or AOP (Association of Persons) or BOI (Body of Individuals) in which he is a partner or member as the case may be.

3.

Under Section 139(1) of the Income-tax Act, an NRI, like any other tax-payer, is required to voluntarily file his income tax return in Form No. 2 or Form No. 3, as the case may be, on or before 31st July.

What is E-filing of return?

The Electronic Furnishing of Return of Income Scheme was introduced in 2004.

Under this scheme, eligible assessees can file their returns of income electronically through authorised persons to act as e-return intermediaries on or before the due date.

The intermediaries digitise the data of such returns and transmit the same electronically to the e-filing server of Income Tax Department under their digital signatures.
Who are the eligible assessees?

Any person, except an AOP/BOI, who has been allotted a permanent account number (PAN) and who is assessed or is assessable to tax in any of the sixty cities, which are presently on Income Tax network is eligible to file his return of income under this scheme.

This is an optional scheme, introduced in Chennai, Kolkara, Mumbai, New Delhi, Ahemedabad, Bangalore and Hyderabad.
What are the annexure documents and other details required to be included with the return of income?

1.

The annexure, statements and columns in the return of income, relating to computation of income chargeable under each head of income, computation of gross total income and total income should be duly filled in.

2.

The return of income must be accompanied by the following:


*

A statement showing the computation of tax payable on the basis of return.

*

The audit report referred to in Section 44AB.


3.

The proof of the tax, if any, claimed to have been deducted at source and the advance tax and tax on self-assessment, if any, claimed to have been paid.

4.

The proof of the amount of compulsory deposit, if any, claimed to have been made under the Compulsory Deposit Scheme (income-tax payers) Act 1974.

5.

Where regular books of account are maintained by an assessee, the following must be included:


*

Copies of manufacturing account, trading account, profit and loss account or income and expenditure account or any other similar account and balance sheet.

*

The personal account of the proprietor and in the case of a firm, the personal accounts of the partners or members, and in case of a partner or member of a firm, his personal account in the firm.


6.

Where the accounts of the assessee have been audited, copies of the audited profit and loss account and balance sheet and a copy of the auditors report.

7.

Where an audit of cost accounts of the assessee have been conducted under Section 233 B of the Companies Act, the auditors' report under that Section.

8.

Where regular books of accounts are not maintained by the assessee, a statement, indicating the amount of turnover or gross receipts, gross profit, expenses and net profit of the business or profession and the basis on which such amounts have been computed, as also the amount of total sundry debtors, sundry creditors, stock in trade and cash balance as at the end of the previous year.

Who should sign the return?

*

In the case of an individual - by the individual himself, or where the individual is not in India, by a person duly authorised by him. Where the individual is mentally incapacitated from attending the affairs, by his guardian or a person competent to act on his behalf.

*

In the case of a Hindu Undivided Family - by the Karta or where the Karta is absent from India or is mentally incapacitated from attending the affairs, by any other adult member of the family.

*

In case of a company - by the Managing Director or where there is no Managing Director for any unavoidable reason, by any director of the company.

*

In case of a firm - by the Managing Partner or in the absence of such Managing Partner by any Partner not being a minor.

*

In case of local authority - by the Principal Officer.

*

In the case of a political party - by the Chief Executive Officer of such party.

*

In the case of any other association, by any member of the association or the principal officer.

*

In the case of any other person, by that person or by some other person, competent to act on his behalf.

If the office is closed on the due date, can the assessee file the return on the next day?

Yes, the assessee can file a return on the next day that the office is open. In such cases, the return will be considered to have been filed within specified limit.
What is meant by 'belated return'?

If the return is not furnished within the time prescribed under Section 139(1) or within the time permitted under a notice issued under Section 142 (1), the person may furnish the return of any previous year at any time before the end of one year from the end of the relevant assessment year, or before the completion of the assessment year.

For e.g. a person is supposed to file a return on October 31, 2004 for the Assessment Year 2004-05. However, for some reason, if the person does not file his return by October 31, 2004, such return submitted after the said date will be considered as belated return.
What are the penalties for belated return?

If an assessee files a belated return, he would be liable for penal interest under Section 234A of Income Tax.
What is meant by 'revised return'? When can a revised return be filed?

If a person has already submitted his return of income and subsequently he discovers any omission or wrong statement therein, he may furnish a revised return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment.
Can a second revised return be filed?

A second revised return can be filed under Section 139(5), correcting omissions or wrong statements made in the first revised return, for the first revised return, filed under Section 139(5) would, in law, be a return under Section 139 (1) as well.
Is any permission required before filing a revised return?

There is no provision in the Income- Tax Act to seek permission to revise a return. It is the right of the assessee to submit such return. However, an application seeking permission to revise a return , as originally filed, cannot be treated as revised return.
What is a defective return?

For the purposes of Section 139 (9), a return of income is regarded as defective, unless all the above conditions, mentioned for details required to be filled in, are fulfilled.
What is a permanent account number?

The permanent account number is allotted by the assessing officer to any person for the purpose of identification.
Who has to apply for a permanent account number? Is it mandatory to obtain a permanent account number?

The following persons should apply for allotment of permanent account number in Form No 49A:

*Every person, if his total income, assessable during the previous year, exceeds the maximum amount which is not chargeable to tax or any person, carrying on business or profession, whose total sales, turnover or gross receipts, are or is likely to exceed Rs 500,000 in any previous year and who has not been allotted any permanent account number is obliged to obtain permanent account number.

*A person who is required to furnish return of income under Section (4A) of Section 139 ( i.e. charitable trust) is also required to obtain permanent account number before the end of the accounting year.

* The Central Government may specify (by notification in the official gazette) any class or classes of persons by whom tax is payable under the Income Tax Act or any tax or duty is payable under any other law for the time being in force, including importers and exporters to apply to the assessing officer for the allotment of a permanent account number.



It is essential to quote your PAN number on:

*Returns to, and/or correspondence with any Income Tax Authority

*Challans for payment of direct taxes

*Application for installation of a telephone connection (including a cellular telephone)

*Application for opening a bank account.

*Documents pertaining to sale or purchase of a motor vehicle (other than two wheelers)

*Documents pertaining to sale or purchase of immovable property valued at Rs 500,000 or more

*Documents pertaining to a time deposit/fixed deposits exceeding Rs 50,000 with a bank

*Documents pertaining to deposits exceeding Rs 50,000 in any account with a Post-Office Savings Bank

*Documents pertaining to a contract of a value exceeding Rs 1 million (Rs 10 lakhs) for sale or purchase of securities (shares, debentures)

*Payment to hotels and restaurants against their bills for an amount exceeding Rs. 25,000 at any one time

Who is not required to have a permanent account number?

The provisions of Section 139 A shall not apply to the following class or classes of persons:

*Persons who have agricultural income and are not in receipt of any other income, chargeable to income tax

*NRIs

*Central Government, State Government and Consular Officers, in transactions where they are the payers.

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