The last date to file your income tax returns for the year is July 31, 2019. If you haven’t already started computing your tax liabilities, it’s time to start now. Although technology has made it easier for us to file our returns online, the details required while filing returns this year ensure that you would have to dedicate a lot more time to this than earlier.
Taxpayers under the age of 80 years would have to bid adieu to paper or physical filing of income tax returns in the year 2019-20. If you have made any donation to charitable institutions, you will have to disclose the amount of such donations made in cash and other modes separately.
Also, ‘Pensioners’ is a newly introduced category in the type of employment apart from Government, PSU or Others. But these minor alterations aren’t the only changes made to income tax returns.
If you are of the view that you would easily pick the return form like last year and file the tax return then think again. Directors on boards of any company and a person, who has investments in unlisted companies would have to opt for ITR 2.
“The income tax department is seeking more disclosures from people to plug the tax evasion loopholes and hence the changes,” says Sudhir Kaushik, founder of taxspanner.com.
So, in ITR 2, those directors and owners of shares in unlisted companies need to file additional details of the company name, the PAN and Director Identification Number.
While filing the income details from your Form 16, merely filling in the gross salary and deductions wouldn’t help. You would have to fill up more columns this year. Specifics of the salary, including perquisites, allowances that are exempt too have to be mentioned.
“The exemption fields have been specifically mentioned to ensure that the employees fill in the relevant information and stop designing a salary structure of their own. The reason for standardisation of Form 16 has been to ensure the right exemptions are being claimed so that the same can be matched with the returns filed by employers,” states Kaushik.
If your Form 16 doesn’t mention the break-up, do request the accounts department for Form 16 in the new format. “This year, Form 16 itself has been amended. The employers will need to give information in the new Form 16. From that Form 16, the data will get auto-populated into the ITR of salaried people. This is a new experiment that the Central Processing Centre (CPC) is trying this time,” says Ameet Patel, partner at Manohar Chowdhry & Associates.
Those who switched jobs during a financial year would find it difficult to hide the income from both employers as the new Form 16 asks for details of both employment (old and new).
“So far, the disclosure of income from the previous employer was optional. Thus, many would claim ignorance and not declare income from the previous employer when they switched jobs. Now they can’t avoid the penalty if they fail to disclose the income from both the employers. The better part is that compliance has become easy, for those who had to calculate the income from two employers due to job switch and the relevant tax fields and deductions,” exemplifies Kaushik.
Interest rate segregation
One is required to give break up of different interest rate – savings bank, fixed deposit or income tax refund interest. This is essential due to the exemption available on savings bank interest up to Rs 10,000 and Rs 50,000 exemption available to senior citizens.
Kaushik of taxspanner.com says, “Hitherto, people would hide the interest income by maintaining fixed deposits in different branches. That has been weeded out now. Interest income can be traced through PAN. Also, taxpayers should make sure that they follow and verify the details mentioned in Form 26 AS like never before. Corrections should be taken up with the bank in case of any mismatch.”
Once again, this is an attempt to curb malpractices in terms of claiming deductions – for example claiming deduction u/s 80TTA of Rs 10,000 even though bank interest did not add up to that figure. Probably, the interest on the income-tax refund will be cross verified with the figure appearing in Form 26AS.
Property and income
Those who are owners of immovable property need to mention the details that would be cross-checked and verified through other sources.
For those who are selling assets, be ready to cough up details instead of merely filling in the figures. For instance, immovable property sellers need to disclose the name of the buyer, his or her permanent account number (PAN), the amount involved and the location of the property sold. If multiple buyers have purchased the property then the share of each has to be notified.
If you have any income from house property such as rental income, then you need to mention if there has been any unrealised rent during the year; a detail that wasn’t asked in the ITR forms earlier. The PAN of the tenant also needs to be disclosed if tax has been deducted on the rental.
Kaushik clarifies, “Those who have been claiming HRA without actually paying the rentals and claiming deductions for home loan interest, are likely to be posed contra questions. Such fields in the ITR would sift the tax evaders so that relevant questions can be raised through online scrutiny or notices.”
Disclosures on exempt Income
There are several areas, in which income is tax exempt for individuals. But to ensure that regular income is not camouflaged as exempt, the income tax department has created additional fields to be filled.
Take for instance, a person earning agricultural income of more than Rs 5 lakh. Such taxpayers would have to fill details of the land, including the area, pincode and even the type of ownership and irrigation method. Break-up of income from agriculture, expenditure incurred on the same and the losses carried forward from previous year have been asked.
We have discussed how salaried individuals need to disclose the exempt income under Section 10 in the salary details filled from Form 16. There is additional detail wanted now about exempt income asked under “Income from other sources”.
Residency status details
Non-resident Indians (NRI) would have to actually mark the number of days of stay in India and abroad in the returns, which so far hadn’t been requested for.
“Everyone knows that for NRIs, income that accrues or arises outside India is not taxable in India. Therefore, it is common sense that many people would try to misuse this and wrongly report that they are NRIs. That way, the global income need not be offered to tax in India. But now, in the ITR, they are asking for the number of days of stay in India. This will help them in independently deciding what the residential status is and nab erroneous reporting of the status,” says Patel about the rationale behind the move.
Non-filing of return
If you had been ignorant about filing returns and have avoided it so far, then a notice to do so might be on a way to you as the taxman has been collating information from various sources and the returns are merely a means to cross-check or cross verify the same. So, file the return within the deadline of July 31, 2019 to avoid penalties.
“The information that any institution files is based on PAN. So, for example, if a mutual fund reports certain investments under my PAN, how can it be difficult for me to verify that? I must have my own information. The only issue here is that documentation is something that very few people give importance to. Most people tend to destroy important documents. And then they say it’s difficult to comply with the income-tax department’s notices,” says Patel.
One would have to bear a penalty of Rs 5,000 if the return for the financial year 2018-19 is filed after the deadline of July 31, 2019, but before December 31, 2019. Those who file the returns between December 31, 2019 and March 31, 2020, would have to pay a penalty of Rs 10,000. If the returns aren’t filed within the deadline, the losses cannot be carried forward too. Also, unpaid taxes attract a penal interest of 1 percent each month.
Ameet Patel, partner at Manohar Chowdhry & Associates, “Advance preparation needed before actually starting to fill the relevant ITR forms has scaled up. One might need professional help to file income tax returns as there are many nitty gritties that would need to be taken into account to file error-free returns.”