INCOME TAX RETURN IN INDIA
Income Tax Return Filing
Income tax collection is the major source of revenue for the government which is required for the development of the country as well as the building of infrastructure, roads, creation of schools, medical facilities, defense, etc. Accordingly, it is the endeavor of every government to bring more and more people under the tax net and encouraging Income Tax Return Filing in an honest manner by every taxpayer and collection of Income-tax to the government which will contribute to nation-building.
Requirement of Tax Return Filing in India
There are two criteria of Tax Return filing in India namely, income-based criteria and non-income-based criteria.
1. Income-based criteria to file an income tax return
Every Person has to file his Income Tax Return in case the aggregate of all his income exceeds the basic exemption limit. There are different basic exemption limits applicable based on the type of person.
It may be noted that the definition of “person” also includes Non-Resident Indians (NRI) and Foreign Companies as well as NGOs. Accordingly, they also need to file tax returns in India.
2. Non-Income based criteria to file an income tax return
Any Individual or HUF shall file his Income Tax Return irrespective of his income, if:
- An amount exceeding Rs. 1 crore is deposited in one or more current accounts maintained with a banking company or a co-operative bank.
- If foreign travel expense is more than Rs. 2 lakh, either for himself or for any other person.
- Electricity consumption expense is more than Rs. 1 lakh
Further, Any Individual who is a resident and ordinary resident in India shall file his ITR irrespective of his income, if he:
- A Beneficial Owner or beneficiary of any asset (including any financial interest in any entity) located outside India.
- Holds signing authority in any account located outside India.
- If he deposits more than Rs. 1 crore in the bank account.
What is the meaning of the Basic Exemption Limit?
The Basic exemption limit means the amount of Income up to which there is no requirement to file an Income Tax return. The limits are:
- For Individuals
- All those who are below 60 years have to pay tax only if their taxable income exceeds Rs. 2.50 lakhs.
- Those over 60 but below 80 enjoy exemption up to Rs. 3 lakhs.
- Very senior citizens who have crossed 80 years enjoy exemption up to Rs. 5 lakhs.
2. For HUF/ AOP/ BOI/ Artificial Juridical Person
The basic exemption limit is Rs. 2,50,000 in the case of HUF/ AOP/ BOI/ Artificial Juridical Person
3. For Firms & Companies
There is no basic exemption limit for a firm or Company. The Income of these entities will be taxable in case there is profit during the financial year. In case of loss, it can be carried forward to next year.
NRI Tax Return
It may be noted that the basic exemption limit is also applicable in the case of Non-Resident Indians. Therefore, the same will be taken into consideration while filing NRI Tax Return. It may also be noted that tax computation in the case of Residents and Non-Resident individuals are quite similar with some differences arising from Residential Status. For example, in the case of Residents, income earned in India as well as outside India is taxable whereas in the case of Non-Residents, only income earned and accrued and arise in India is taxable.
Different Tax Rates applicable in India
- For Individuals: Tax Rate applicable on Individuals and HUF range between 5% to 30% depends on the Income. The Higher the income, the higher the tax rate is.
- For HUF/ AOP/ BOI/ Artificial Juridical Person: Tax Rate applicable on Individual and HUF range between 5% to 30% depending on the Income. The Higher the income, the higher the tax rate is.
- For Firms: A firm is taxed at a flat rate of 30%
- For Companies:
- In the case of domestic companies: Tax rates varies from 15% to 30%, depending on various factors.
- In the case of foreign companies: A foreign company is taxed at a flat rate of 40%.
Different Surcharges applicable in India
The Surcharge is levied on the amount of income if the total income of an assessee exceeds specified limits.
- In the case of Individuals, HUF/ AOP/ BOI/ Artificial Juridical Person if net income exceeds 50 lacs surcharge will be levy at the rate of 10% to 37 %, as per the income.
- In the case of Firms, Surcharge is levied @ 12% on the amount of income-tax where net income exceeds Rs. 1 crore.
- In the case of domestic companies: if net income exceeds Rs. 1 Crore surcharge will be levy at the rate of 7% and if net income exceeds Rs. 10 Crore surcharge will be levy at the rate of 12 %.
- In the case of foreign companies: if net income exceeds Rs. 1 Crore surcharge will be levy at the rate of 2% and if net income exceeds Rs. 10 Crore surcharge will be levy at the rate of 5%.
Health and Education Cess: Health and Education Cess is levied at the rate of 4% on the amount of income tax plus surcharge.
Indian Tax system requires the advance collection of taxes for any particular year. Accordingly, as per law, every person, whose estimated tax liability is more than Rs. 10,000 is liable to pay advance tax. However, senior citizens who are above the age of 60, not having any income from business or profession are excluded from paying advance tax.
Important dates for advance tax payment
- On or before 15th June 15% of advance tax.
- On or before 15th September 45% of advance tax.
- On or before 15th December 75% of advance tax.
- On or before 15th March 100% of advance tax.
Type of Income Tax Return Forms
There are seven types of income tax return forms, that can be used to file tax returns, the appropriate one is to be decided based on the income level of the individuals/businesses.
- ITR-1 (Sahaj) and ITR-4 (Sugam) are simpler Tax Return filing Forms available for small and medium taxpayers.
- ITR-1 can be filed by an individual having income up to Rs. 50 lakh and who receives income from salary, one house property /other sources (interest, etc.).
- Similarly, ITR-4 can be filed by individuals, Hindu Undivided Families (HUFs), and firms (other than Limited Liability Partnerships (LLPs)) having total income up to Rs. 50 lakh and income from business and profession computed under the presumptive taxation provisions.
- ITR-2 can be file by Individuals and HUFs not having income from business or profession (and not eligible to file ITR-1).
- Those having income from business or profession can file ITR-3.
- Persons other than individuals, HUF, and company’s i.e. Partnership firm, LLP, etc. can file ITR-5.
- Companies can file ITR-6.
- Trusts, political parties, charitable institutions, etc. claiming exempt income under the Act can file ITR-7.
Due dates for Filing ITR extended for FY 2020-21
In view of difficulties faced by taxpayers and other stakeholders in the filing Income, CBDT has extended various due dates for filing ITR. Same are as under:
- The due date for Income Tax Return (Assessees not subject to Audit), the original due date of which is 31st July 2021 has extended to 31st December 2021.
- The due date for Income Tax Return (Assessees subject to Audit), the original due date of which is 31st October 2021 has extended to 15th February 2022.
- The due date for Income Tax Return (Assessees subject to Transfer Pricing Report), the original due date of which is 31st November 2021 has extended to 28th February 2022.
E-Filing Income Tax
- Furnishing of ITR in paper form: A super senior citizen whose age is 80 years or above at any time during the previous year who furnishes the return either in ITR-1
or ITR-4 can file ITR in paper form.
- Furnishing of ITR in electronic form: For persons other than above, ITR filing only in electronic form through the Income Tax E-filing portal is permissible.
New Income Tax Portal
The income tax department has recently launched on June 7, 2021 (www.incometax.gov.in) with the intention to provide the taxpayers with a more convenient and modern seamless experience on the portal. Although the taxpayers are facing a lot of difficulties in ITR Filing as well as filing of forms 15CA and 15CB and other work on the new portal, however sooner the difficulties will be removed and the new portal will be very useful to the end-users.