With the Income-tax Return (ITR) filing deadline fast approaching on July 31, 2019 [for individuals not subject to tax audit provisions under the Income-tax Act, 1961 (the Act)] for Financial Year (FY) 2018-19, taxpayers must assess and initiate the process for filing their ITR to avoid any last minute difficulties.
Who should file an ITR?
An individual has to file an ITR in the prescribed form if his/her gross taxable income [calculated before eligible exemption available for long-term capital gains on listed securities up to Rs 1 lakh and other deductions under Chapter VI-A of the Act] during a particular FY exceeds the maximum amount not chargeable to tax. For FY 2018-19, total income up to Rs 2.5 lakh is not subject to tax for an individual. For a resident senior citizen (age of 60 years or more during any time in a particular FY) and resident super senior citizens (age of 80 years or more during any time in a particular FY), such threshold of total income is Rs 3 lakh and Rs 5 lakh, respectively. As a Resident and Ordinary Resident (ROR) individual, one may still have an ITR filing obligation irrespective of taxable income, if he/she owns assets outside India.
Computation of income and taxes
First, income under each head of income needs to be computed separately and set-off/carry forward of loss must be stated to determine the gross total income.
Once the gross total income is determined, deductions available under chapter VI-A of the Act (such as Section 80C in respect of specified investments/expenditure, Section 80D for medical insurance premium, Section 80G for eligible donations, etc.) can be claimed to arrive at the total taxable income. On such taxable income, applicable slab rates of tax should be applied to compute the total tax liability (net of rebate under Section 87A of the Act, if applicable). Any taxes due on the tax return after claiming credit of prepaid taxes (taxes deducted at source and advance taxes paid during the year) and foreign tax credit of taxes paid outside India should be paid (including applicable interest if any) before filing the tax return.
Income-tax return forms
The tax return forms notified for FY 2018-19 applicable to individuals are:
Every individual has to mandatorily file his/her return electronically except certain prescribed super senior citizens.
Before filing the tax return, an individual having both PAN and an Aadhaar number should mandatorily link them on the income-tax e-filing portal as per the provisions of the Act. However, a foreign citizen who does not possess an Aadhaar number (as per the provisions of Aadhaar Act 2016) is not required to link it with the PAN.
Broadly speaking, the process for filing the tax return electronically is as under:
- The taxpayer should register and login into the income-tax e-filing portal using personal credentials such as PAN, password and date of birth;
- Retrieve and verify online tax credit statement (Form 26AS) in support of taxes deducted at source by the employer/any other deductor and advance taxes paid during the year;
- Prepare computation of income and taxes. Based on the same, pay the balance taxes payable, if any, as self-assessment taxes using challan no. 280.
- Taxpayers claiming foreign tax relief should prefill the details in Form 67 and submit along with supporting documents. Such form is required to be verified online thereafter.
- Tax return (only for ITR 1 and ITR 4 forms) can be prepared and submitted through an online functionality available on the income tax e-filing portal. Alternatively, one can download and fill the prescribed utility of the applicable income tax return form offline, generate an xml file and upload the same on e-filing portal.
- While filling the aforesaid forms (either in online or offline mode), the taxpayer should also adhere with the prescribed disclosure requirements like details of directorships held, unlisted shares (opening balance, investments disposed during the FY, closing balance, etc.), Schedule AL for details of assets and liabilities held in India if total income exceeds Rs 50 lakh, Schedule FA relevant for ROR taxpayers for reporting foreign bank accounts, financial interest in an entity, equity/debt shares and other assets details, etc.;
- Post uploading the return, an acknowledgement of the tax return filed (Form ITR-V) would be generated which can be validated either online (through Aadhaar OTP, net banking etc.) or through physical signatures within prescribed period to complete the filing process.
While the online filing system does not allow uploading of any documents (except documents in support of foreign tax relief claim in Form 67), it is advisable to retain all relevant documents in support of income disclosed, claims of exemption/deduction made, etc. This could help if ITR is selected by the tax department for an audit subsequently.
In summary, while the entire process has become almost electronic, diligence would need to be exercised by the taxpayer to use the correct forms, report the correct details of income/deductions, etc. as any mis-reporting has varied consequences under the Act.
(The author is Partner and Head, Global Mobility Services-Tax, KPMG in India)