Today, filing a tax return

1. asFiling of Income Tax Returns by Individuals
Pitfalls and Precautions
CA Ameet Patel

2. F
Statutory Warning!
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The objective of this presentation is not to scare
the viewer.
However, such a result could be incidental.
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3. Do You Want To File A Tax Return?
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4. SOME BASICS
Filing Individual Income Tax Returns

5. Some Basics
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Few Clarifications
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Financial Year v/s Assessment Year v/s Previous Year
Scope of income depends on residential status
Residential status is to be determined every year
NRI (under FEMA) is different from Non Resident under Income Tax Act
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Total Income
 Tax department concerned with your “Total Income” and not any other income
 Total Income is
 Aggregate of all the income various Heads of Income
 Reduced by deductions available
 Tax is payable on Total Income
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6. WHEN IS IT MANDATORY?
Filing Individual Income Tax Returns

7. When Is It Mandatory?
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Am I Always Liable To File A Return?
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 No
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When Am I Liable To File A Return?
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 Only When
 Total income exceeds the basic threshold limit
 Carry forward of business/capital loss to the next year
 Or When A Person Has
 Any asset located outside India
 Signing authority in any account located outside India
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Each assessment year/fiscal year is different
A person liable to file return in AY 2013-14 may not necessarily be liable in AY 2014-15

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Tax Threshold Limits for FY 2013-14
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Category of Tax Payer
Resident Individual tax payers who are very senior citizens
(for 80 years or more)
Resident Individual tax payers who are senior citizens
(more than 60 years up to 80 years)
Threshold Limit
INR 5,00,000
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INR 2,50,000
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Individual tax payers and HUFs
(Including women tax payers)
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INR 2,00,000
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9. WHEN IS THE DUE DATE?
Filing Individual Income Tax Returns

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When Is The Due Date?
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Type Of Assessee
Individuals requiring audit of accounts under ‘ITA’ or any other
law, working partner of firm subject to audit
Person subject to transfer pricing regulations
Due Date
30th
September
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30th
November
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All other cases
31st
July
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Revised Return
A Return of Income filed in time can be revised if one discovers any omission or any wrong statement therein, but before expiry of 2
years from the end of the relevant financial year (31st March)

11. Belated Return
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Meaning
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 Return filed after due date given in the law
 Return of Income can be filed after the due date, but before expiry of 2 years form the end of
the relevant financial year (31st March)
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Disadvantages of a Belated Return
 Loss cannot be carried forward in a belated return
 Belated return cannot be revised
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12. Penalties/Interest In Case of Non-Filing
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Conditions
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If a person is required to file a tax return as per the laws and fails to do so or files the same after
the due date, the following penalties/interest are applicable
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Penalty
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 If a person fails to file a return of income before the end of the relevant assessment year, he
may be charged INR 5,000 as penalty by the Assessing Officer
Interest
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 An interest @ 1% per month (or part of the month) is payable commencing from the due
date of filing the return till the date of filing
 When return is not filed, interest is calculated up to the date of completion of assessment by
the Assessing Officer
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13. THE FILING PROCESS
Filing Individual Income Tax Returns

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The Filing Process
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Which Income Tax Return form is to be used by me?
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Form
Number
Applicable To
ITR – 1
(Sahaj)
i) More than one HP
ii) B/f losses under HP or loss under IFOS
iii) Winnings from Lottery or Income from
Individual having income only from
Race Horses
Salaries, Family Pension, House Property iv) R & OR having foreign assets/signing
(HP), Income from Other Sources (IOS)
authority in foreign bank account
v) Claim for foreign tax credit/relief under
section 90/90A/91
vi) Exempt income exceeding INR 5,000
ITR – 2
Not Applicable To
Individual/HUF
Individual/HUF having business/professional Income
ITR - 3
Individual/HUF who is partner in a firm
Individual/HUF having any other business/
professional income
ITR - 4
Other Individual/HUF
having business/professional income
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15. The Filing Process
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ITR 1 or ITR 2?
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 For AY 2013-14, individuals with exempt income of more than INR 5,000 cannot use ITR 1
 Some examples of exempt income are:
 Dividend
 Transport Allowance
 House Rent Allowance (HRA)
 Leave Travel Allowance (LTA)
 Interest on PPF
 Hence, even though dividend, etc. earned may not be more than INR 5,000 for the year, one
has to include, HRA, transport allowance, etc. mentioned in Form 16 to calculate exempt
income
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16. eFILING RETURNS
Filing Individual Income Tax Returns

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eFiling Returns
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When Is It Mandatory?
Criteria
All persons whose total income is up to INR 5
lac
All persons whose total income exceeds INR 5
lac but does not exceed INR 10 lac
Person claiming benefit of Double Taxation
Avoidance Agreement (‘DTAA’)
Resident and ordinarily resident having assets
outside India or signing authority in any
account located outside India
To whom tax audit is applicable
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Electronic
Filing
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Physical
Fining
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Digital
Signature
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18. SOME PRECAUTIONS
Filing Individual Income Tax Returns

19. Some Precautions
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Important Points To Note
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 Choose the correct ITR form
 Claim deductions and exemptions correctly
 Even if you are an employee, don’t forget that the ultimate responsibility of correct
claims is YOURS
 Maintain documents carefully and systematically
 Most debits and credits happen electronically now – be careful about supporting
documents
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20. Some Precautions
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Key Considerations
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PLEASE maintain and update your bank passbook/statement carefully
Keep explanation for every debit and credit entry in the bank account
PLEASE maintain mutual fund and DEMAT account statements
PLEASE maintain dividend warrants
For every credit entry in the passbook ascertain whether the same is taxable or
exempt
 For every debit entry in the passbook ascertain whether it is deductible from taxable
income or not
 As far as possible, make all payments by cheque/from bank account so that all tax
saving investments are reflected in the bank account
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21. F
Some Common Deductions That You Claim
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Claim Deductions And Exemptions Correctly
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Deduction for Investment
Investment For
Premium on Life Insurance Policy
Self, Spouse, Children
Contribution to Public Provident Fund Account
Self, Spouse, Children
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Contribution by Employee to Recognised Provident Fund
Self
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Tuition Fees to any university/college/school in India (full-time education)
Any two children
Repayment of Housing Loan
Self
Fixed Deposit (5 years or more) with a Bank
Self
Time Deposit with Post Office (Post Office Time Deposit Rules, 1981)
Self
National Savings Certificates
Self
Long Term Infrastructure Bonds notified by the Central Government
Self
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Rajiv Gandhi Equity Savings Scheme (50% of amount invested for 1 year only)
Self
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Health Insurance/Medical Claim and Preventive Health Checkup
Self, Spouse, Parents and
Dependent Children
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22. A Few Specific Precautions
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Life Insurance Premium
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 The annual premium paid should not be more that 20% of the assured sum
 The limit is reduced to 10% for policies issued on or after 1st April, 2012
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An Illustration
 If the sum assured in the policy is INR 2,00,000 then, the premium up to INR 40,000
is allowed and if the policy is issued after 1st April, 2012, the premium deductible is
INR 20,000
 If the premium paid exceeds above limit in any year, the whole of amount received
on maturity becomes taxable
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23. A Few Specific Precautions
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Donation
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 Employers cannot give credit for deduction in respect of donations while making the
tax deduction from salary
 Therefore, this deduction will not reflect in your Form 16
 However, you can claim it separately while filing your tax return
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24. A Few Specific Precautions
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Loans (Taken/Repaid)
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 The Income Tax laws prohibit any person to take or accept or repay any loan
exceeding INR 20,000 by “any mode other than an account payee cheque or
bank draft”
 If you have given/taken a loan – PLEASE obtain a loan confirmation every
year
 Ensure that you have the PAN of that other person
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25. A Few Specific Precautions
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Gifts
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Gift Tax abolished long back
Gift from relatives are exempt from taxation – without any limit
Gifts from non-relatives exceeding INR 50,000 p.a. taxed to recipient as Income
Relative has a wide definition in the Act which means the following:
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spouse of the individual;
brother or sister of the individual;
brother or sister of the spouse of the individual;
brother or sister of either of the parents of the individual;
any lineal ascendant or descendant of the individual;
any lineal ascendant or descendant of the spouse of the individual;
spouse of any of the persons referred above
 An interesting point is for an uncle, the nephew is not a relative; but vice versa is
true
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26. TAX CREDIT
Filing Individual Income Tax Returns

27. Tax Credit
Applicability
 TDS from your income is available as tax credit to you – Right? Wrong?
 You get credit for the taxes ONLY if they appear in your Form 26AS
 So, what is Form 26AS?
Form 26 AS
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A pass book of taxes
Every tax payer has a Form 26AS
Can be accessed/downloaded from www.incometaxindiaefiling.gov.in
TDS credit claimed in the Return of Income and corresponding income should match with the
information in your 26AS
 Mismatches generally invite notices from the department
 Ensure that Form 16 and 16A of credit available in 26AS are available with you
 Ensure that for every tax entry, the “Status of Booking” shows “F” i.e. Final
 Status showing “U” for any item means the deductor has made a mistake
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28. Tax Credit
Illustration 1
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29. Tax Credit
Illustration 2
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30. FILLING INFORMATION
Filing Individual Income Tax Returns

31. Filling Information
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Basic Guidelines
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 Available on the official website of the Income Tax department
www.incometaxindiaefiling.gov.in
 Certain private software and websites also provide the facility
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 However, the utility by the department is recommended
 Utility provided by the Government
 Facilitates validates the sheet and computes tax
 Converts information filled into .xml file format
 .xml format then unloadable on the income tax website
 In case of physical filing, a print can be submitted with the jurisdictional Assessing
Officer
 Imperative to give a functional email address in the return form to effectively
communicate with the Income Tax department
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32. Filling Information
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New Requirements (ITRs)
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 Introduction of ‘Schedule FSI’ – details of income accruing or arising outside India – in all
ITRs except ITR 1
 In ITR 3 and ITR 4, a new schedule ‘Schedule AL’ – Assets and Liabilities at the end of the
year has been introduced, to be filled where total income exceeds INR 25 lac. Assets and
liabilities as on 31st March need to be disclosed.
 Personal assets and liabilities (other than business/partnership) need to be disclosed
 Probable reasons for introducing ‘Schedule AL’
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 Cases where it has been found that the assets of a taxpayer do not justify the income earned by
him
 Disclosure to help keep a check on the assets acquired and the income earned
 Many taxpayers with huge assets are not paying wealth tax
 Will help Government seek information of the assets and cross-verify tax payment
 Assets are to be disclosed at cost
 How to disclose assets received as gift/inheritance?
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33. PHYSICALLY OR ELECTRONICALLY?
Filing Individual Income Tax Returns

34. Physically or Electronically?
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Filing Return of Income
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 Experience suggests that refunds are received very quickly in case of e-returns
 Therefore, it is advisable to eFile your returns
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35. E-FILING PROCESS
Filing Individual Income Tax Returns

36. Filing Process
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Steps To Upload Returns
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Register on the Income Tax eFiling website
Login on the registered account
Go to eFile  Upload Return
Select the appropriate ITR Form and the appropriate assessment year
Attach the .xml file generated by the utility
Select whether it is to be signed digitally or not
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37. F
Filing Process
Step I
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Register Yourself
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38. F
Filing Process
Step II
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Login To Your Account
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39. F
Filing Process
Step III
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Upload Returns
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40. F
Filing Process
Step IV, V, VI
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Select ITR Form, AY, .XML File and Applicability of Digital Sign
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 Select “Submit” generates the acknowledgement receipt
 Save a copy and take a print for your records

41. DOCUMENTATION
Filing Individual Income Tax Returns

42. Documentation
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Points To Remember
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 An Income Tax Officer can take up a case for scrutiny before the end of 6 months
from the end of the financial year in which the return is filed
 Hence, until the above period is over, the Assessing Officer can demand documents
and explanations
 Apart from this, they also have the power to reopen past assessments. This can be
done for past 6 assessment years
 Therefore, during Diwali cleaning, please do not destroy your old records of past 8
years
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43. ANNUAL INFORMATION RETURN
Filing Individual Income Tax Returns

44. Annual Information Return
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The Government does not tax the air yet
But the Government’s AIR is very taxing for tax payers
What is AIR?
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45. Annual Information Return
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Concept
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Annual Information Return (AIR) of ‘high value financial transactions’
Required to be furnished by certain specified agencies
In respect of ‘specified transactions’ registered/recorded by them
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46. F
Annual Information Return
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Class of Person Required to
Nature and Value of Transaction
File AIR
Bank
Credit Card Company
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Cash deposits aggregating to INR 10 lac or more in a year in any savings account
Payments made in respect of a credit card aggregating to INR 2 lac or more in the
year
Mutual Fund
Receipt from any person of INR 2 lac or more for acquiring units of that Fund
Company/Institution issuing
Receipt from any person of INR 5 lac or more for acquiring bonds or debentures
Bonds/Debentures
issued by the company/institution
Company issuing Shares
Receipt from any person of INR 1 lac or more for acquiring shares issued by the
through a Public/Rights Issue
company
Registrar/Sub-Registrar
Purchase/sale by any person of immovable property valued at INR 30 lac or more
Authorised Officer of the
Receipt from any person of/ aggregating to INR 5 lac or more in a year for bonds
Reserve Bank of India
issued by the Reserve Bank of India
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47. Annual Information Return
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Importance of AIR for Individuals
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Individuals are not required to file AIR returns
However transactions of individuals are reported to the department by AIR returns
Hence the high net worth transaction reported, are electronically mapped with the
return of income filed of that individual.
Notices can be received
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If no return is filed and high value transactions are reported
If income disclosed is much less relative to the amount involved in the transaction
reported
If you get a notice/scrutiny, you will be asked to match the entries in the AIR
with your records. Have you kept your records?
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48. WEALTH TAX
Filing Individual Income Tax Returns

49. Wealth Tax
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Applicability
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Wealth tax is chargeable @ 1% on the following assets
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Buildings
Motor Car
Jewellery and Bullion
Yachts, Boats and Aircrafts
Urban Land
Cash in Hand more than INR 50,000
Wealth tax is payable if the total value of assets is more than INR 30 lac
Due date of filing return is same as that applicable in case of and Income Tax
Return
 Wealth tax return needs to be filed on the same date as the return of income
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50. APPROPRIATE PRECAUTIONS WILL SAVE
YOU FROM THE PITFALLS…!!
Filing Individual Income Tax Returns

51. THANK YOU
FOR YOUR
PATIENCE
Ameet Patel
patelameet@hotmail.com
This presentation is for demonstration purposes only