INCOME TAX RETURN:
An income Tax Return or ‘ITR’ is a form in which a person is required to file information about his/her income and taxes, which is then submitted to the Income Tax Department of the country. This form is a necessary document that carries information regarding transactions of the given financial year.
The Income Tax Act of 1961 and the Income Tax Rule 1962 oblige a person falling under the threshold of compulsory filing, to submit ITR to the Income Tax Department at the end of every financial year. This means if a person files his return for the year 2020, the information contained in the form shall be from April 1st to March 31st of the given financial year. Proper documents must be attached to the return in order for it to be considered valid in the eyes of the Income Tax Department.
DELAYED RETURNS:
Given the current situation in the world, the novel coronavirus has already caused a lot of disruption and has put the financial and economic prospects at a standstill. It has had a far-reaching impact on the lives of every person. The governments have taken it upon themselves substantially to cure the world of this virus however, the economic fallout hasn’t gone unnoticed by these officials and they are having difficulty managing this task.
The government has been observant and looking at the disruption in production cycles and economic activity, it has provided some relaxation on the front of key compliance timelines for individual taxpayers so that there are no penal consequences for the delay in filing taxes that are caused by reasons which are not in the hands of the individuals. The salaried employees are the worst hit by the effects of the pandemic. The shrinking segment of the taxpayers, as the tax experts see, is the consequence of the indication as well as the possible delay that could be caused due to the extensions provided to the taxpayers by the authorities.
● The latest government data shows that there has been a 6.6% contraction in the number of income tax returns filed by individuals earning up to 50 lakhs in the financial year 2019-20.
● The latest data on income tax returns show a 9.8 per cent contraction in the filing of ITR-1 offline and a 4.5 per cent contraction in the filing of ITR-1 online for the financial year 2020.
● The ITRs filed by high-income earners also showed a decline. A 3.5 per cent decline was recorded in the financial year 2020for for the filings of ITR-2.
● The overall filings of businesses and corporates shrank by 6.5 per cent in the financial year. The filings of ITR-3 contracted by 18.3 per cent in the same financial year.
Before understanding the extensions that the government approved, it is important to note the threshold and eligibility for the taxpayers in India that get revised after every budget if need be.
The persons falling under any of the mentioned criteria need to file their tax returns with the income tax department on the date specified by the Ministry of Finance or the Department itself –
● People whose gross total income before any deductions exceeds Rs. 2.5 lakhs in a financial year. The threshold for senior citizens under this category is Rs. 3 lakhs while for super senior citizens is at Rs. 5 lakhs.
● Companies or organizations, irrespective of whether they have made a profit or incurred a loss during that period.
● Those persons who want to claim an income tax refund.
● Resident individuals who have a financial interest or asset located outside India. This does not include NRIs.
● Foreign companies taking treaty benefit on a transaction in India
● NRIs, whose income exceeds Rs. 2.5 lakhs in a financial year, which is accrued in India, need to file the return in India
These returns need to be filed before the specified due dates. These dates can only be altered through a national declaration by the finance department of the country. There are various forms catering to the different requirements of fulfilment from the Assessee, who is the person filing the return. These forms are namely – ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6, and ITR 7. Each person belongs to a different category in the taxable section.
Hence, it becomes necessary to identify the right firm for filing returns as these forms cater to separate criteria for the source of income and the category of the Assessee. Filing the wrong form may lead to no consideration for the claims or refunds as the form stands invalid in the Tax Department. For more information on the same, any person providing CA services for business and taxes can be contacted.
The following forms are used by the taxpayers, to file their returns either individually or as a unit or a company.
● ITR 1 – Also known as SAHAJ, it is an essential income tax form for Indian citizens for the filing of Returns to the department. The word ‘Sahaj’ translates in Hindi to be easy. The persons who have earned their income in a financial year through salary or pension, through one house property, or through other sources like FD interest, spousal pension etc. are required to file income tax return through form ITR 1. The other sources of income do not include income through a lottery, legal gambling or racecourse betting.
● ITR 2 – It is an important form for Indian residents as well as non-residents of India for filing their tax returns. The due date specified for the filing of the taxes is 31st July. Any changes in the specified date with be issued by the Income tax department of the Ministry of Finance. The financial year ends on 31st March, which gives the persons filing returns four months to file their returns in order.
● The form is available for individuals as well as Hindu Undivided families to file their returns. A person who earns their income from salary or pension, income through house property, short-term and long-term capital gains or other sources like legal gambling, racecourses and lottery are eligible to file their return through this form.
● ITR 3 – This form specifically applies to individuals and Hindu undivided families who are registered partners in a firm. As per rule 12 of the Income Tax Rules 1962, this form does not apply to persons who are Proprietors in a firm. Thus, it is clear that this form is only available for those who are partners in a firm, gain income through profits of the business or gain income through salary, remuneration, bonus, or commission as a partner.
● ITR 4 – This form is available to those individuals and Hindu Undivided Families who gain their income from business or profession computed under sections 44AD, 44ADA or 44AE of the Income Tax Act. As discussed earlier by the suggestions of tax experts, the delays can be caused due to the relaxations granted by the government. Some of these are –
1. Extension of Deadlines:
The government has extended the deadline for individual taxpayers for filing their taxes. Some of the examples of the same include the PAN and Aadhar linking which was originally
supposed to be done by 31 March 2020 and was extended to 31 March 2021. The same way Filing of returns was extended from 31 July 2020 to 30 November 2020, Issuing of India tax withholding certificate was extended from 15 June 2020 to 15 August 2020, to name a few.
2. Deductions and Relief:
The government implemented the Taxation and Other Laws Ordinance in 2020 to leeway the individuals for saving tax in the financial year 2020. Investments and payments made for claiming deduction under section 80C (LIC, PPF, NSC, etc), section 80D (Mediclaim), section 80G (Donations), section 80CCD(1B) NPS deposits), section 80DD (expenses on medical treatment of differently-abled dependants), etc., are now eligible for being claimed in FY 2019-20, where payment/investment is made till July 31, 2020. The date for making investments in order to claim capital gains exemption under section 54 to section 54GB is extended to September 30, 2020, for FY 2019-20.
Therefore, any investment, deposit, payment, acquisition, purchase, construction, or any similar action, which was required to be made for claiming exemption as per the above sections, can now be made until September 30, 2020. For example, the deadline for investment in capital gains bonds that must be made within six months of the date of sale of the asset, also now stands extended.
3. Relaxation on Interest Implications:
In order to provide relief to small and middle-class taxpayers (e.g. salaried individuals, individuals with other sources of income, etc.), the CBDT had extended the date for payment of self-assessment tax in the case of a taxpayer whose self-assessment tax liability is up to Rs 1 Lakh, to November 30, 2020.
Therefore, there is a waiver of interest u/s 234A (interest levied for delay in filing the tax return beyond the due date) to the taxpayers whose self-assessment tax payable is up to Rs 1 Lakh. However, the CBDT has clarified that there will be no extension of the date for the payment of self-assessment tax for taxpayers having self-assessment tax liability exceeding Rs 1 lakh.
Hence, interest under section 234A will be levied from August 1, 2020, till the date of filing the tax return. All delayed payments of advance tax, self-assessment tax, TDS, etc. whose due date falls between the period March 20, 2020, to June 29, 2020, will be charged at a reduced interest rate i.e., 9% p.a. instead of 12% p.a. The reduced rate of interest of 9% p.a. for delayed payments of taxes, levies, etc. shall not be applicable for the payments made after June 30, 2020.
4. Relaxing Residency Rules:
The Indian government, as part of several COVID-19 relief measures, has relaxed residency norms for individuals stranded in India owing to the lockdown. Many individuals had visited India during the FY 2019-20 and intended to leave India before the end of FY 2019-20. However, due to the declaration of lockdown and suspension of international flights, individuals were required to / extend their stay in India. This extended period of stay in India may result in a change of residential status for certain individuals. Therefore, such an extended period of stay would be excluded from determining residential status for FY 2019-20 in accordance with the CBDT circular No. 11 dated 08 May 2020. Additionally, there are some Tax Implications on Housewives taxation to give them some financial relaxation.
CONCLUSION:
In order to ensure that there is no financial burden due to the law obligation of the country in times of unforeseen events, the government has taken to its absolute measures in order to relieve the taxpayers. However, the relaxations have led to dishonest behaviour on part of the individual taxpayers, the stats of which are well known.
Therefore, in order to boost the economy again and minimize the colossal effect of the pandemic on various economic strata within the country as well as around the globe, we should be responsible for making good use of these terms and extensions and not contract the revenue of the government any further. The expenditure on healthcare and sanitization has already ripped the budgetary console. For more light on the topic, any CA services for tax can be consulted on the same.