Sample Chapter from Swatantra Sethi’s new e-Book- “Self Preparation and filing of Income Tax Return by Individuals”.

Every individual, whose Gross Total Income (income before allowing deduction under Chapter VI-A i.e., sections 80C to 80U of the Income-tax Act, 1961) exceeds the maximum amount not chargeable to tax, is required to file return of income. The maximum amount not chargeable to tax, in case of individuals, is as under:

Sr. No Category of Individual Maximum amount not chargeable to tax in rupees
1. Individuals, being resident in India, who are below the age of 60 years

 

2,50,000/-
2. Individuals, being resident in India, who are of the age of 60 years or more at any time during the previous year

 

3,00,000/-
3. Individuals, being resident in India, who are of the age of 80 years or more at any time during the previous year

 

5,00,000/-

To compute gross total income, the amounts received by an assessee during the previous year are classified and grouped under various heads of income. Amount of gross total income is arrived at after application of various provisions of the Income-tax Act, 1961 to total receipts grouped under various heads. Total receipts are grouped under the following heads:

  • ‘salaries’;
  • ‘income from house property’;
  • ‘profits and gains of business or profession’;
  • ‘capital gains’; and
  • ‘income from other sources’.

Provisions for computation of income under each head are discussed in subsequent chapters.

E-filing of income-tax return

Framework for e-filing of income-tax returns has been provided by the Department of Income-tax, Government of India, on its website https://incometaxindiaefiling.gov.in. The Income-tax Department has provided free return preparation software as income tax return forms (ITRs) which are fully compliant with data quality requirements. These downloadable ITRs are available as macros enabled excel sheets and ITR Java Utilities. The return is accepted on e-filing website in XML format. The excel utilities as well as java utilities have inbuilt validation checks, provision for calculation of tax and conversion into XML format. Instructions to fill in ITR are also available as PDF file which can be downloaded from the e-filing web site.

Steps involved in preparation and e-filing of income-tax return

Steps involved in preparation and e-filing of income-tax return are discussed here under:

Registration on e-filing portal

Filing of income-tax return in electronic mode is generally referred to as e-filing of income-tax returns. For e-filing of income-tax returns an individual has to register on e-filing portal/website https://incometaxindiaefiling.gov.in using his PAN and providing personal details as per the Form displayed on the screen. After submission of details, verification is required for activation of user ID. Verification is generally done by clicking on a link sent to the e-mail ID and/or by keying in ‘One Time Password’ sent to the e-mail ID and the mobile number provided by the user in his personal details. For login purposes User ID would be the PAN of the individual.

Selection of applicable Income-tax Return (ITR) Form/Utility

Selection of Income-tax Return Forms is governed by the composition of total income of the individual. These forms are available as ITR Utilities. Income Tax Return Forms applicable to individuals for assessment year 2017-18 are discussed below:

Income Tax Return Forms Applicable to Individuals

ITR 1 – SAHAJ ITR 2 ITR 3 ITR 4 – SUGAM

 

Can be used by: Individual whose total income does not exceed Rs.50 lakhs and  includes income from:

· Salary/Pension

·One house property

· Other sources

Applicability of clubbing of income of spouse, minor child, etc. should be only in respect of incomes under the above heads.

However, Income from other sources should not include income from

· Winnings from lottery

·  Race horses

·  Dividend exceeding ten lakh rupees for resident individuals

 

Can be used by: Individual

· who is not eligible to use ITR 1 – SAHAJ

· whose income chargeable to tax under the head “Income from business or profession” is in the nature of receipts from a partnership firm in his capacity as a partner by way of salary, interest, commission, bonus, etc. He is not carrying out a proprietary business or profession.

Can be used by: Individual who is carrying out a proprietary business or profession and is not eligible to use ITR 4.

 

Can be used by: Individual whose total income does not exceed Rs.50 lakhs and  includes income from:

· Salary/Pension

·One house property

·Business or profession computed under presumptive taxation scheme

· Other sources

Applicability of clubbing of income of spouse, minor child, etc. only in respect of incomes under the above heads.

However, Income from other sources should not include income from

·         Winnings from lottery

·         Race horses

·         Dividend exceeding ten lakh rupees for resident individuals

 

There should not be

·         Unexplained cash credits (Sec 68)

·         Unexplained investments (Sec 69)

·         Unexplained money, jewellery, bullion or other valuable article (Sec 69A)

·         Investment, bullion, jewellery or other valuable articles not fully disclosed

·         Unexplained expenditure (Sec 69C)

·         Amount borrowed or repaid on a hundi otherwise than by an account payee cheque (Sec 69D)

·         Agricultural Income in excess of Rs.5000

·         Brought forward losses from house property to be set off against the income of current year

·         Loss under the head Income from Other Sources

·         Individual does not claim relief for foreign tax paid (double taxation relief)

·         Individual being resident does not have any asset located outside India or is signing authority in any account located outside India

or any source of income outside India

—– —– There should not be

·         Unexplained cash credits (Sec 68)

·         Unexplained investments (Sec 69)

·         Unexplained money, jewellery, bullion or other valuable article (Sec 69A)

·         Investment, bullion, jewellery or other valuable articles not fully disclosed

·         Unexplained expenditure (Sec 69C)

·         Amount borrowed or repaid on a hundi otherwise than by an account payee cheque (Sec 69D)

·         Agricultural Income in excess of Rs.5000

·         Income from speculative business

·         Income from agency business or commission or brokerage

·         Brought forward losses from house property to be set off against the income of current year

·         Loss under the head Income from Other Sources

·         Individual does not claim relief for foreign tax paid (double taxation relief)

·         Individual being resident does not have any asset located outside India or is signing authority in any account located outside India or any source of income outside India

Guidelines for using ITR Utilities

After selection of appropriate ITR Form, download the relevant ITR Utility. Downloaded utility may be either ITR Excel Utility or ITR Java Utility based on the choice of the user.

General guidelines with respect to use of ITR Utilities are given below:

ITR Excel Utility:

ITR Excel Utility is a macro enabled excel workbook with number of worksheets containing schedules for data entry. Each sheet is identified by the sheet tabs at the bottom which are labelled/named with abbreviations of the schedules of the sheet. Steps involved in working on this utility are:

  • Enable macros before you start filling in the data/information.
  • Data entry cells have a green background.
  • There are mandatory and non-mandatory fields for data entry.
  • Mandatory fields have red font.
  • Non-mandatory fields have black font.
  • Data/information is to be keyed in manually in data entry cells.
  • Do not copy/paste the data/information in data entry cells.
  • The excel utility contains number of schedules/sheets in which data is to be filled in. The assessee has an option to select applicable sheets and work on those sheets only.
  • On the home page, in respect of sheets against green cells in column 5 and 6, option of applicability and printing can be exercised.
  • Fill in applicable schedules.
  • Validate each sheet.
  • Click on calculate tax.
  • Generate XML.
  • Save XML.
  • Upload the XML.

ITR Java Utility

ITR Java Utility run on operating systems windows 7 or above, Linux, Mac OS with necessary Java Runtime Environment (JRE) version 7 update 6 or version 8 update 51. Steps involved in working on this utility are:

  • Download zip folder of latest version of the utility.
  • Extract/unzip the utility.
  • ‘New’ button is used to generate a new copy of ITR Form.
  • ‘Open’ button is used to import data from an existing XML by selecting the path of the existing XML.
  • ‘Prefill’ button is used to auto fill personal, address and tax details.
  • ‘Save Draft’ button is used to save the XML in draft form while working on the utility.
  • ‘Re-calculate’ button is used to re-calculate the data for utility based calculation and validation.
  • ‘Save’ button is used to save completed XML which can be uploaded on e-filing portal.
  • ‘Submit’ button is used to upload the saved XML on e-filing portal.

Verification of income tax return

The return may be furnished electronically under digital signatures of the Assessee. Under the circumstances no further verification is required. If the return is not furnished under digital signatures, after uploading the file the individual has to verify the return. Without verification the return would not be treated as valid. Verification may be either e-verification or Form ITR-V can be generated and printed in two copies, one signed copy of ITR-V need to be sent to Centralized Processing Centre, Income Tax Department, Bengaluru – 560 500. This can be sent by Speed Post/ Ordinary Post. On receipt of ITR-V at CPC the same shall be updated in the system and an e-mail intimation of its receipt will be sent to the assessee. The assessee can check from the e-filing portal the status of receipt of ITR-V at CPC Bengaluru. ITR-V should reach CPC within 120 days of filing/uploading of the return on e-filing portal. In case of filing of return in paper form ITR-V should be filled in, on which acknowledgement should be obtained.

E verification:

Following options are available for e-verification of income tax return at the time of uploading/after uploading:

  • Generation of EVC through bank ATM then verification of income tax return under option ‘I already have an EVC to e-verify my return’. EVC can be generated by swiping the ATM card at an ATM and selecting the option ‘Pin for Income Tax Filing’. EVC is received on registered mobile number and e-mail ID.
  • Online generation of EVC under option ‘I do not have an EVC and I would like to generate EVC to e-verify my return’. Generation of EVC under this option can be through:
    • net banking;
    • pre-validated bank account number;
    • pre-validated demat account number; or
    • generation of EVC through registered e-mail ID and mobile number. This facility is available in cases where taxable income is less than rupees five lakhs, amount of refund/demand is less than or equal to rupees one hundred and e-mail ID and mobile number registered in e-filing profile is unique.
  • Generation of Aadhaar OTP to verify the return where PAN and Aadhaar have been linked.

Income tax department has come out with an e-verification usual manual containing detailed guidelines for e-verification of returns. This manual can be accessed/downloaded from this link.

 

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