Mukesh Patel.in
practical tax & investment planning online
international tax expert / columnist / author / speaker

IT’S TIME FOR YOUR TAX RETURNS!

You need to know atleast this much on mandatory E-filing & filing returns even where no tax is payable!

              Starting from Companies in Assessment Year 2006-07 and Partnership Firms liable to tax audit under Section 44AB in Assessment Year 2007-08, Proprietorships of Individuals and HUFs liable to tax audit from Assessment Year 2010-11, have all been mandatorily required to file their income-tax returns electronically.

MANDATORY E-FILING FROM AY 2012-13

              With effect from Assessment Year 2012-13, mandatory filing of E-returns has been extended for all Individuals and HUF taxpayers having taxable income of Rs.10 lakhs or more.

               Moreover, a resident Individual or HUF (other than not ordinarily resident in India) shall be required to file E-return, if such Individual or HUF has assets (including financial interest in any entity) located outside India or has signing authority in any account located outside India. This obligation for mandatory e-filing of the Income-tax Return will be required to be discharged, even where the taxpayer having such assets outside India does not have any taxable income in India. It needs to be noted that for this purpose, Non-Residents or Residents but Not Ordinarily Residents, within the meaning of Section 6 of the Income-tax Act, will not be required to declare any of their overseas assets in their Indian Tax Returns.

               All other Individuals and HUFs have been given the option to file their tax returns, either in a paper form or electronically. The Income-tax Return forms (except ITR-7 for charities and political parties) have been designed as annexure-less so as to make them amenable for electronic filing.  

               Taxpayers are required to submit annexure-less returns, with the stipulation that all supporting documents, statements, receipts, certificates, audited reports etc., otherwise required to be furnished alongwith the return, shall be produced before the Assessing Officer, only on demand. Section 139C of the Income-tax Act has made statutory provisions in this regard.

GET SET TO FILE RETURN THOUGH NO TAX!

               Section 139 of the Income-tax Act provides that an Individual or a Hindu Undivided Family is required to file his Income-tax Return, if his Gross Total Income (GTI) prior to various deductions under Section 80 family (such as 80C, 80D, 80G etc.) exceeds the basic income-tax exemption limit. From Assessment Year 2013-14, the prescribed exemption limit is Rs.2,00,000 (in case of both a male and female taxpayer), Rs.2,50,000 for resident Senior Citizens, aged 60 years and above but below 80 years and Rs.5,00,000 for resident Super Senior Citizens aged 80 years and above.

               GTI includes within its scope the total of all taxable incomes, after considering the relevant deductions available under the five heads of income, but before allowing the eligible deductions under Section 80 family for purpose of computing the Total Income. The case studies below will meaningfully illustrate this point.

Case Study – 1: Mr. J earned gross salary of Rs.4,00,000 in FY 2011-12. After excluding his exempt allowances and perquisites of Rs.70,000, his taxable salary works out to Rs.3,30,000. The interest payable on housing loan eligible for deduction under Section 24 is Rs.1,00,000 and his taxable income from other sources is Rs.30,000. His GTI thus works out to Rs.2,60,000 (3,30,000-1,00,000+30,000). Mr. J has invested Rs. 1,00,000 in investments eligible for deduction u/s 80C and also paid Mediclaim premium of Rs.10,000 entitled to deduction under Section 80D. His TI stands determined at Rs.1,50,000 (2,60,000-1,00,000-10,000) and therefore, the income-tax payable by him is Rs. Nil. However, in this case, Mr. J would be required to mandatorily file his tax return for Assessment Year 2012-13.

Case Study – 2: Taxable Pension and investment income of Mr. R, a Senior Citizen (aged around 70 years), is Rs.2,40,000. In this case, the GTI of Mr. R is Rs.2,40,000, which is below the basic exemption limit of Rs.2,50,000 in his case as a Senior Citizen. He is thus under no obligation either to pay any tax or even to file his tax return for Assessment Year 2012-13.

Case Study – 3: If in Case Study-2, if the GTI of Mr. R was Rs.3,35,000 and he had invested Rs.1,00,000 in Section 80C savings, his TI would work out to be Rs.2,35,000. Although no tax would be payable by him in this case, he would still be required to file his income-tax return for Assessment Year 2013-14, his GTI being higher than his exemption limit of Rs.2,50,000.

Case Study – 4: Mrs. P earns annual rental income of Rs.2,50,000. She is entitled to a standard deduction of Rs.75,000 (at 30% of the annual rental) and accordingly her GTI works out to Rs.1,75,000. This being lower than her personal exemption limit of Rs.1,90,000, she is not required to file her tax return for Assessment Year 2012-13.

              The underlying logic of the aforesaid provisions is that the Income-tax Department would want your I.T. return to be under its tax scanner, if you are claiming a zero tax status on account of any deductions eligible under the family of Section 80. So even if you have no tax to pay, be ready to file your tax return in time, if your Gross Total Income exceeds your personal exemption limit!

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