Blog

• If you feel that Income Tax Return filing is a taxing task, you are not alone. For a layman, just the name is enough to induce shivers. The tax return filing season for F.Y. 2016-17 is on the horizon & the government has come up with a good news at the right time.
• Do you remember that our Finance Minister had promised to introduce a simple one-page ITR form for tax filers? The form was expected to offer huge relief to taxpayers with income below Rs. 5 lakh. The recent news is even better than that. Now this one-page ITR form will make tax return filing simpler for a bigger chunk of taxpayers. Salaried individuals with income up to Rs. 50 lakh & having rental income from one house only will also be able to file their tax return easily with this one-page ITR.

Why has this step been taken?

• There are several reasons why people find filing taxes daunting & boring. For most people, this is a once in a year activity. Income Tax rules also change every year. So, people tend to forget how they filed their taxes in the previous year. As a result, they have to learn everything all over again. This further leads to poor tax planning, unclaimed refunds & defective IT returns. A large number of people often skip this essential activity.

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Provisions:

• No Person shall receive an amount of three lakh rupees or more,
  
  1. in aggregate from a person in a day;
  2. in respect of a single transaction; or
  3. in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account.

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• The government made a very important announcement for people living in metropolitan cities. Now people staying in rented accommodation paying more than Rs. 50,000 per month as rent are required to deduct tax on behalf of their landlord. Government has taken this step to widen its tax net. However, this has put additional tax compliance burden on the rent payers.
• It has proposed to introduce a new section, 194-IB in the Income Tax Act to provide that an individual or a HUF (other than those covered under 44AB of the Act), responsible for paying rent to a resident exceeding Rs. 50,000 for a month or part of month during the previous year, shall deduct an amount equal to 5% of such payment as income-tax thereon. The following amendment will take effect from the date budget gets the final approval from the President of India.
• Further, a proposal has been made in the Act that tax shall be deducted on such payment at the time of credit of rent, for the last month of the previous year or the last month of tenancy if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier. It is also proposed to provide that tax so deducted shall be deposited only once in a financial year through a challan-cum-statement to be notified soon.

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• As we are approaching towards the end of this financial year, there are certain things we should do before the year comes to an end.

1. File pending IT for financial year 2015-2016 to avoid penalty

• Though the general due date of filing of income tax returns is 31st July of the year following the financial year, a few of us wouldn’t have been able to file the return by the due date and then must have forgotten the matter altogether. Please file your pending income tax return for the financial year 2015-2016 by 31st March 2017. In case you have taxable income and fail to file the returns for the financial year 2015-2016 by 31st March 2017, the assessing officer can levy a penalty of Rs. 5,000 for this default. However, the assessing officer cannot do so without giving you an opportunity to explain the reason for such failure.
• If the return has not been filed by due date, you cannot revise the return later on. So be very careful while filing the return and ensure that all the particulars are correctly stated and all the income is correctly included in the return. Note that in case the tax payable in respect of any of the returns which you are planning to file now, was not paid either as advance tax or TDS, you may have to pay the interest for non payment of advance tax as well as for delay in filing of income tax return @ 1% for each of the default. So effectively if adequate tax was not paid earlier you land up paying exorbitant interest @ 2% for each month of the delay.

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• The government made several tax proposals aimed at the housing and infrastructure sector. But apart from vowing pukka houses for the masses, an important announcement too was made, which has the potential to change the way taxes are levied on buying and selling houses.
• If assets are held for long-term one can adjust the purchase price in accordance with inflation to reduce the tax applicable. This period of long-term differs from one asset to another. For debt-mutual funds it is 36 months and for unlisted shares it is 24 months, while for listed shares it is 12 months.
• So, far immovable property should have been held for 36 months to be considered long-term. The Union Budget 2017-18 proposes to shrink this period to 24 months as well, in line with unlisted shares.

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