The finance minister has proposed some changes in the provisions
relating to income tax returns. Let us discuss these provisions.
Provisions relating to filing of income tax returns
At present, an individual or an HUF (Hindu undivided family) has to
file its income tax return, before the due date which is generally 31st
July of the subsequent year, if the total income before deducting
various deductions available under Chapter VIA exceeds the basic
exemption limit. These deductions include various deductions like those
under section 80C for life insurance premium, EPF, PPF, NSC, ELSS,
school fee, repayment of home loan, ULIP etc. The other deductions
available are for NPS, Mediclaim, medical expenses incurred for
specified disease or dependent special person , interest on saving bank
upto Rs. 10,000/-etc.
So though your income may not be taxable after giving benefits of the
various deductions available but you are still required to file your
income tax return if your income before such deduction exceeds Rs. 2.5
lakh in case you have not completed 60 years, Rs. 3 lakh if you are a
senior citizen and Rs 5 lakh if you have completed 80 years of age.
Presently, as per section 10(38) of income tax act, all the long term
capital gains (asset held for more than 12 months) earned on sale or
redemption of shares and units of equity oriented schemes are exempt if
STT (Securities Transaction Tax) has been paid on such sale or
redemption . Though the income tax returns forms required the assessee
to mention details of exempt income in the form, such information of
exempt income even if substantial were not available to the income tax
department in case the total income before the deductions did not exceed
the exemption limit. The budget proposes that while calculating the
amount of total income for the purpose of requirement to file the income
tax return, the amount of exemption available in respect of such long
term shares/units shall not be deducted. Hence in case your total income
before claiming various deductions under Chapter VIA as well amount of
exemption available under Section 10(38) in respect of long term capital
gains on shares and units of equity oriented schemes exceeded the basic
exemption amount, you will have to file your income tax return even if
there are no tax liabilities. This will even cover the cases where the
tax payer does not have any taxable income during the year but the
amount of exempt income exceeds the basic exempt income in which case
you will have to file the income tax return.
Time limit for filing belated return
Presently you can file your return even after you miss the initial
due date of 31st July within two years from the end of the year for
which you have to file your income tax return. This return which is
filed after the due date is called belated return. For example, for the
year ended 31st March, 2015 your due date was 31st July 2015 but you can
file the same by 31st March 2017 i.e. two years from the end of the
year. The budget proposes that from next year onwards you will have to
file your income tax return within one year from end of the year. So the
income tax return for the current financial year which will fall due on
31st July 2017 will have to be filed before 31st March 2018. So on 31st
March 2016 two returns will become time barred simultaneously one for
the year ended 31st March 2016 and the other for the year ended 31st
March 2017.
Right to revise the return of income filed
After having filed your income tax return, if you notice any error or
omission, you can file a revised return, only and only if the original
return of income has been filed by the due date i.e. 31st July. So in
case you miss to file the original return by the due date, though you
can file the return within two years but you cannot revise the same in
case you find some severe mistake in the return already filed. The
budget proposes to remove this disability and gives you the right to
file revised return as many times as you want within a period of one
year from the end of the year.
It may please be noted that though you will be able to revise your
income tax return filed after the original due date of filing, but you
will lose your right to carry forward losses in case the return is not
filed by the due date of 31st July.
Provisions of defective return
Presently the law gives powers to income tax officer to treat an
income tax return filed as defective return in certain circumstances and
give you an opportunity to rectify the mistake within 15 days. In case
you do not rectify the mistake within the time allowed, the return filed
is treated as not having been filed ever. One of the reason for which
the income tax return can be treated as defective is when you have not
paid the taxes which are due as per the income returned on or before the
due date of filing the income tax return. So if you file your income
tax return without paying full taxes payable, the tax officer would
treat the same as defective and in case you fail to rectify this defect
within time allowed and the return filed would be treated as
non-existent. The presumption of income tax return not having ever been
filed used to cause lots of problems to the tax payers. The budget
proposes to remove this reason for treating the return as defective. So
from next year even if you file your income tax return without paying
the tax due, the return would still be treated as perfect return except
that you may have to interest on the short fall of the taxes.
From the above discussion it appears that the budget proposals
relating to filing of income tax returns are generally tax payer
friendly except curtailing the time limit for filing the belated return.