Personal income tax return: who must file and how to file the ITR

The income under each income heading must be calculated separately in accordance with the respective provisions of that income heading.

For individuals [not subject to tax audit provisions under Income-Tax Act, 1961 (‘the Act’)] the deadline for filing the tax return for fiscal year 2020-2021 has now been extended to December 31, 2021. Significant changes have been made to the tax return process this year due to the launch of a new income tax portal. Thus, it is relevant to choose the appropriate RTI form and fill in the correct details when filing the RTI.

Who must file an ITR

An individual is required to file an ITR in the prescribed form if his or her gross taxable income [calculated before eligible exemption available for long-term capital gains on listed securities upto Rs 1 lakh and other deductions under Chapter VI-A of the Act] during a given financial year exceeds the maximum non-taxable amount.

For fiscal year 2020-21, total income up to Rs 2.5 lakh is not subject to tax for an individual. Such threshold income for a resident senior (age 60 or over) and resident super elderly (age 80 or over) is Rs 3 lakh and Rs 5 lakh, respectively.

In addition, a natural person whose income is not taxable, but meets one or more conditions specified below is required to provide his income tax return.

i) Deposit of an amount or aggregates of an amount exceeding Rs 1 crore in one or more current accounts;

ii) Expenses incurred in an amount or a total amount exceeding Rs 2 lakh for travel to a foreign country for yourself or any other person;

iii) Expenses incurred in an amount or a total amount exceeding Rs 1 lakh on electricity consumption.

Calculation of income and taxes

First, the income under each income category must be calculated separately in accordance with the respective provisions of that income category. Subsequently, losses carried forward / from the current year must be compensated to determine the total gross income.

Once the total gross income is determined, the deductions available under Chapter VI-A of the law (such as section 80C with respect to specified investments / expenses, section 80D for medical insurance premiums, etc. ) can be claimed to obtain the total taxable income. . On this taxable income, the tax rates applicable to the slab should be applied to calculate the total tax payable (net of the refund under section 87A or relief under section 89 of the Law, if applicable).

The 2020 finance law introduced a new optional tax regime for taxpayers with modified tax brackets and rates, instead of the prescribed exemptions and deductions. We can assess between this new tax system and the old tax system and proceed according to what is advantageous. All taxes due on the tax return after claiming the prepaid tax credit (taxes withheld at source and withholding taxes paid during the year) and the foreign tax credit of taxes paid in outside India must be paid (including applicable interest, if any) before reporting the tax back.

RTI forms

The income tax return forms notified for fiscal year 2020-21 applicable to natural persons are:

General overview of how to file an ITR

Each individual must file their declaration electronically, except super seniors producing ITR-1.

In general, the process for filing the tax return electronically is as follows:

1. The taxpayer must register (if not already done) and log into the electronic income tax filing portal.

2. Retrieve and verify the online tax credit statement (Form 26AS) in support of taxes withheld at source by the employer / any other deductible, withholding taxes paid during the year and any other relevant information.

3. Prepare the calculation of income (including claims for exemptions and deductions) and taxes. On the same basis, pay the balance of taxes payable, if any, as self-assessment taxes using challan no. 280.

4. Taxpayers requesting foreign tax relief must pre-complete the details of Form 67 and submit them with supporting documents. This form should be verified online before filing the RTI.

5. Taxpayers with business / professional income who choose to opt for the new optional tax regime should also complete the 10IE online form.

6. The income tax return can be prepared and submitted through an online functionality available on the electronic income tax filing portal. You can also download the pre-filled ITR and complete the prescribed utility of the applicable offline tax return form, generate an XML file and upload it to the e-filing portal. It is advisable to verify the information contained in the pre-filled ITR and make the necessary additions of the income not declared in the tax return.

7. While completing the aforementioned forms (in online or offline mode), the taxpayer must also comply with the prescribed disclosure requirements such as details of mandates held, unlisted shares, Annex AL for details of assets. and liabilities held in India, Annex FA relevant to ROR taxpayers for reporting foreign bank accounts, financial interests in an entity, debt stocks / shares and other asset details etc. . ;

8. After uploading the return, an acknowledgment of receipt of the filed tax return (ITR-V form) would be generated, which can be validated either online (via Aadhaar OTP, net banking, etc.) filing process.

In summary, as the entire RTI filing process has become almost electronic, the taxpayer will need to be diligent in using the correct forms, reporting the correct income / deduction details, etc. various consequences under the Act.

(By Parizad Sirwalla, Partner and Manager, Global Mobility Services-Tax, KPMG in India)

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