Thinks to Be Kept in Mind While Filing ITR of Individual in India- By CS Annu Sharma

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Dear Folks

Hope You all are Doing well during this Pandemic!

In this write up I am sharing with you all, Pre-Requisites of Filing Income Tax Return of an Individual Specifically for financial year 2019-2020. All taxpayers must be ready with their Interest Certificates, Form-16 and other essential documents but there are still few important points which skipped by an Individual if he/she himself filing the return.

We should be careful while filing our ITR Not Just because of taxation or penal provision there could be other proceedings as well, this year the original due date was July 31, however, it was extended by govt. due to nationwide issue of COVID-19.

Let’s just bright up your screen and begin with your checklist for the Income tax Return ITR for financial year.

• One is liable to file ITR even if no tax dues:
   

Once you start earning, being a responsible citizen, one must file their Income tax return.

 Generally, a taxpayer believes that he isn’t liable to file tax return since there is no tax liability pending during the financial year. It should be kept in mind that ITR has to be filed irrespective of the fact whether the tax is required to be paid or not. Generally, in case of individuals what triggers the liability for filing of ITR is the fact that the gross total income of the assessee is more than the maximum exemption limit.

 

• Different Categories of Individual Taxpayers: 

There are three different categories of taxpayers in India as per there age and financial status.

 

1.      Individuals who are below the age of 60 years, including residents as well as non-residents

2.      Resident senior citizens who are 60 years and above but below 80 years of age

3.      Resident super senior citizens who are above 80 years of age.

 

• Most Important -You Must have Correct set of Information and documents.

 

1	PAN of Individual.
2	Aadhar of Individual
3	Mobile Number and Email
4	TDS Certificates (if any)
5	FORM-16 (if any)
6	Bank Statements (Interest Part Mainly)
7	Proof of Investment in 80C, 80CC, 80CCD (if any)
8	Document Regarding Medical Insurance (if any)
9	Loan Documents (if any)
10	Investment Statement of SIP, Derivatives, Commodities etc. (if any)
11	Rent Receipts (if any)
12	Proof relating to other sources of income (if any)

 

 

• Choice of Income Tax Form as per the Income sources.
   
  Since there are multiple Forms of return notified by the tax authorities. Out of these, ITR 1 to 4  are applicable to individuals/HUFs, while ITR 5 is for Partnership Firms and LLP, ITR 6 is for Companies other than those claiming exemptions (See Rule 12) and ITR 7 is for  [For persons including companies required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D (Please see rule 12 of the Income-tax Rules).  Therefore, correct form needs to be filled in.
   
  The ITR Form and corresponding incomes are listed below:
   

ITR 1 – Salary Income, House Property Income and Income from Other Sources (Interest income, Winnings from lottery etc.)

ITR 2 – Salary Income, House Property Income (more than one House Property), Capital Gain Income, Income from Other Sources, Agricultural income upto Rs .5000

ITR 3 – Salary Income, House Property Income (more than one House Property), Capital Gain Income, Income from Other Sources, Proprietorship Business Income, Professional income, Partnership income and agricultural income more than Rs.5000

ITR 4 S- Individuals opted for the presumptive income scheme as per Section 44AD, Section 44 ADA and Section 44AE of the income tax act.

 

A Pro Tip:  ITR-1 cannot be filed by a taxpayer who is a Director in a company or who has held investments in unlisted equity shares at any time during the financial year. Such taxpayers will have to use ITR-2 or ITR-3 form for FY2020.

 

 

 

• Determination of residential status:
   

What is to be included in total income of assessee is greatly influenced by his residential status in India. Total Income of an assessee cannot be computed unless his residential status is determined as per provisions of the Income Tax Act.

 

The residential status of each person shall be determined separately as per the set of rules prescribed for the relevant category of person. For example, residential status of an individual is determined based on his number of days of stay in India.

 

• Check TDS and TCS information by downloading Form 26AS:
   

Now, the ITRs are linked with the Form 26AS, resulting prefilled information in the ITRs relating to form 26AS. But for a safer side it is advisable to cross verify the information as reflecting in Form 26AS with that of the information in the ITRs. Before filing the return every assessee should verify the credits in the 26AS form in order to ensure that the return filed is free from error.

A Pro Tip: if you are claiming a refund, make sure that the bank details provided are accurate so that you receive your refund smoothly. Also, you have to report all bank account details held by you except dormant accounts (accounts which are inactive for the past three years).

 

• Benefits to file ITR on time:
   

File your return on time without errors to avoid penalty up to Rs.10,000 under section 234F.

If you don’t file the return on or before the due date, the rate of 1% will be charged every month, or part of the month, on the amount of tax remaining unpaid as per section 234A.

Carrying forward of the losses is not allowed if you don’t file the return on or before the due date. You will be deprived of carrying forward your losses for set off against your income in the next years.

 

 

A Pro Tip: Every individual shall keep a safe custody of all the documents relating to the deductions claimed to avoid further inconvenience during the proceedings. Such documents include the deductions claimed under Section 80C, Section 80D etc.

 

• E-verification of Income tax return -ITR:

Make sure that the return is e verified within 120 days. You can also send the signed acknowledgement to the income tax CPC office if you are not able to e verify the same. Your return won’t be processed unless you e verify. The return filed but not e-verified will be treated as an invalid return.

 

As a Concluding note of this write up -Review your income tax return, having incorrect information in your filing will slow down the receipt of your tax refund. Check all numbers and do double calculations, as these are the most common mistakes of tax filers. Ensure your figures tally without any discrepancies.

Dear Folks 

Have a Great Day!

WHY TO GET A PAN NUMBER OR PAN CARD?

Obtaining PAN is may be optional or voluntary like passport, driving license, Aadhaar etc. However, its use is mandatory at required places, like PAN for high-value financial transactions, Driving License for motor driving, passport for foreign travel and more.

• For payment of direct taxes
• To file income tax returns
• To avoid deduction of tax at higher rate than due
• To enter into specific transaction such as:
• (a) Sale or purchase of immovable property value exceeding specified limit (b) Sale or purchase of a vehicle other than a two wheeler.
• Any mutual fund purchase.

WHO MUST APPLY FOR PAN- Permanent Account Number?

1. Anybody who earns a taxable income in India, including foreign nationals who pay taxes here.
2. Anybody who runs a business (be it retail, services or consultancy) that had total sales, turnover or gross receipt exceeding a specified limit in the previous financial year. (From December 5, 2018. The new rule has made it mandatory for all businesses with a net turnover/ gross income of up to Rs 2.5 lakh per year to have a PAN)

The most common word which affects the life professional, corporate and other people is PAN, in this advance era still people have question or myth that we don’t get salary from anywhere so we don’t require PAN Card. In this write-up we will have an insight under the concept of PAN Card .The primary objective of PAN is to use a universal identification key to track financial transactions that might have a taxable component to prevent tax evasion. The PAN number remains unaffected by change of address throughout India.

PAN, or permanent account number, is a unique 10-digit alphanumeric identity allotted to each taxpayer by the Income Tax Department under the supervision of the Central Board of Direct Taxes. It also serves as an identity proof. PAN Card is mandatory for financial transactions such as receiving taxable salary or professional fees, sale or purchase of assets above specified limits, buy mutual funds and more.

HOW TO APPLY?

1. Use 'Form 49A' or 'Form 49AA' as applicable to you. Find more details at incometaxindia.gov.in.
2. You can find the location of PAN card offices in any city from the websites of the Income Tax Department or National Securities Depository Limited (NSDL)or UTI Infrastructure Technology (UTIITL).
3. You will need copies of proof of Identity and address.
4. You can also apply online through websites of the I-T Department (Income Tax) or National Securities Depository Limited NSDL or UTI Infrastructure Technology (UTIITL).

WHICH FORM TO USE?
49A	49AA
Individual Citizens of India.	Individual who are not Indian Citizens
HUF-Hindu Undivided families.
Companies Registered in India.	Companies Registered outside India.
Associations Registered in India.	Firms Formed or Registered outside India.
Firms’, Including LLP’s Formed or Registered in India.	LLP’s Formed or Registered outside India.
Local Authorities

STRUCTURE OF YOUR PAN - PERMANENT ACCOUNT NUMBER

For illustration -A typical PAN is AFZPK7190M. The combination in which alphabet and numbers are arranged is explained further.

• First three characters i.e. "AFZ" in the above PAN are alphabetic series running from AAA to ZZZ.
• Fourth character of PAN i.e. "P" in the above PAN represents the status of the PAN holder. "P" stands for Individual, "F" stands for Firm, "C" stands for Company, "H" stands for HUF, "A" stands for AOP, "T" stands for TRUST etc.
• Fifth character i.e. "K" in the above PAN represents first character of the PAN holder's last name/surname.
• Next four characters i.e. "7190" in the above PAN are sequential number running from 0001 to 9999.
• Last character i.e. "M" in the above PAN is an alphabetic check digit.

A pan card is required for a lot of purposes thus making it an extremely valuable and indispensable part of most people lives. The likeliness of PAN identity theft has grown with the growing importance of PAN. Merely safeguarding the physical copy cannot prevent misuse. Information can be misused very easily for benami property transactions or purchase of tickets of high value, as a majority of transactions demand simply quoting of the PAN or a photocopy of the PAN Card. Thus, a copy of your PAN card or its number could be quoted in transactions that you are not even a part.

Specially for Companies incorporated/registered these days are in a very comfort zone as PAN and TAN is allotted to them on immediate basis every company registered in India is mandatory to have a PAN Number , Now by simplified approach companies get there PAN printed of Certificate of Incorporation of a Company, it also helps to open bank account very fast in case of Company.

Company Registration has got one feather by this instant TAN and PAN allotment.

{The author is a Company Secretary  and can be reached at (M) 7021848742and (E) csannusharma123@gmail.com}

CS Annu Sharma is a Commerce Graduate and an Associate Member of the Institute of Company Secretaries of India (ICSI). She has cumulative experience of more than 3 years with Listed Company, CA and CS firms. She authored various articles on the topics of Corporate Laws, Securities Laws, DGFT, Income Tax, Start-ups among other. Articles authored by her are published on prominent Professional Websites.

HUF as a Tax Planing Device

As our finance budget is recently announced why not to start planning about Tax specially Income Tax as Indirect tax GST (Good & Simple Tax) is already taking away our savings, our discussion for the day will be how to save more tax by forming Hindu Undivided Family (HUF) .

In legal language Hindu Undivided Family ('HUF') is treated as a 'person' under section 2(31)of the Income-tax Act, 1961 (herein after referred to as 'the Act'). HUF is a separate entity for the purpose of assessment under the Act

First of all “HUF Meaning “

The Income Tax Act 1961 provides that a HUF (Hindu Undivided Family) is separate unit like an individual and is too assessed accordingly. A HUF is eligible for those exemptions that are available to a resident Indian who is not a senior citizen. It can own property and also have its own business.
Income Tax Act, 1961 provides legal opportunities to save Income tax; it will not be prudent if you are not taking benefits of such provisions.

 HUF is an entity, which has been given certain exemptions, quite similar to an Individual by the IT Act. If you are a born Hindu or a Sikh or a Buddhist or a Jain, you can take benefit of these provisions, and if possible you should take it.

Now what does it includes?

The HUF includes those persons who, by birth, acquire an interest in some joint family property. It also includes all lineal descendants of these persons, and their wives, and children, both sons and daughters. Even married daughters can remain a part of the HUF, while being a member of her spouse’s family HUF.


Most important: - Benefits

To understand the income tax benefits let us take an example of a family, which is now common, the nuclear family.
Rahul is married to Bhawna and have two minor children, Prabha (daughter) and Rajat (son). Rahul’s annual income is Rs. 20,00,000 and Priya Rs. 20,00,000. Rahul has inherited an ancestral property, an apartment, which is on rent (annually Rs. 12,00,000).

If Rahul forms a HUF, with him the Karta (head of the HUF), his children will be called coparceners and his wife will be a member. The first benefit Rahul, will have that the rent income of Rs. 12,00,000 which was hitherto assessed as part of his income and now be carved out and shown as HUF income, and the HUF will be assessed separately as another entity and will have the benefit of the exemptions of IT Act similar to those received by Rahul.

This will lead to substantial reduction of Income tax being hitherto paid by Naresh and the HUF will pay a much smaller amount of Income tax on this income of Rs. 3,00,000/- after enjoying the exemptions available. Also, the gifts received by the coparceners/member(beyond the exemption limit) can be shown as received by the HUF, thereby reducing the income tax burden of both Naresh and Priya.

Now, you may invest the HUF income in LIC policies, PPF accounts, ELSS instruments in the name of Karta, coparceners or member of the HUF and it will get the income tax deductions under Section 80C.

How to form a HUF?

The following steps are required to form a HUF:

 Prepare a Notarized stamp paper as an affidavit for forming an HUF.

 Then apply for PAN (Permanent Account Number) from the income tax authorities with a rubber stamp, ID Proof, residence proof and the proof of the members of the family of HUF.

 The rubber stamp should be rectangular carrying the name of the HUF and that of the Karta

 Open a bank account in the name of Hindu Undivided family titled “Aditya& Sons HUF” Transfer the rent income received from the ancestral property along with the excess gift amount received by the HUF members (Karta, coparceners and members)

Who should actually form a HUF?
HUF will be a good option for persons who have sufficient income and savings and who also have some ancestral property too (which could be treated as family assets for HUF). Before forming a HUF one should calculate the tax benefits clearly and then take a calculated decision.
It is advisable to hire a financial advisor, well versed in forming HUF and who will be able to give the pros and cons so that an informed decision can be taken about formation of HUF.

Disadvantages of HUF
Though a significant amount of tax can be saved by forming a HUF, there are few disadvantages of HUF which should be taken into consideration. Whenever an asset is transferred to HUF it remains with it. Only when the coparceners will demand a partition of HUF, the property can be shared by the coparceners.

HUF property cannot be mentioned in the WILL. In case of Tarun HUF, the ancestral property transferred to HUF will remain part of HUF and Tarun later cannot transfer to his wife or son or daughter. Of course after his death, his son will become the Karta, but other members will enjoy the benefits and income of the HUF.

Conclusion of our discussion: This was just a brief piece of my understanding; HUF is more and vaster:- to be continued till my next writing: