What’s New, And What’s Not, In This Year’s Income-Tax Returns

Taxpayers not filing income tax returns on time or not quoting Aadhaar will face penalties, according to new guidelines by the Central Board of Direct Taxes. The government has made the unique ID must for obtaining the permanent account number and filing income tax returns, a move that multiple petitions have challenged in the Supreme Court.

However, taxpayers will have to comply with it. Chartered accountants Akshata Kapadiya and Bhadresh Doshi, during a lecture organised by the Bombay Chartered Accountants’ Society, explained what changed this year, the penalties applicable and confusion while filing income tax returns.

BloombergQuint breaks it down for you…

Aadhaar Mandatory, And Not

NEW: The government had made Aaadhar mandatory to file income-tax returns for all individuals under Sec 139 AA of the Finance Act, except non-resident Indians, non-citizens, those aged above 80 years and residents of Jammu & Kashmir, Assam and Meghalaya. Taxpayers without the Aaadhar number had to state enrollment details. However, the Supreme Court provided interim relief by allowing taxpayers who don’t have PAN to file returns without applying for Aadhaar.

Interest Payments

NEW: Those not paying taxes within the due date will have to pay 1 percent interest till the date of payment. Taxpayers filing income tax returns late will miss out on interest on tax refunds,.

Deadlines

NO CHANGE: The last date of filing returns is July 30 for individuals and September 30 for companies, and November 30 for partnership firms on which transfer pricing audit is applicable.

Late Returns

NO CHANGE: Late returns can be filed till the end of the financial year. So, this time late returns can be filed till March 31 next year. Revised returns can be filed till March 31, 2019.

NEW: For the next financial year, late and revised returns have to be filed by the end of the year – March 31, 2019.

Number Of Forms

NEW: The number of forms has been reduced from nine to seven. The ITR-2, 2A and 3 have been consolidated into one ITR-2.

Long-Term Capital Gains

NEW: Individuals will have to factor in long-term capital gains, or gains from assets owned for over 12 months, to calculate total income. Which means even if an individual’s income is less than Rs 2.5 lakh but goes beyond the threshold after adding long-term capital gains, the person will have to file returns.

Late Fees From Next Year

NEW: From the next assessment year 2019-20 (financial year 2018-19), late returns will invite a penalty of Rs 1,000 for those with total income below Rs 5 lakh, said Kapadia during the presentation. Taxpayers earning more will have to pay Rs 5,000 as penalty for returns delayed till December 31 and Rs 10,000 beyond that.

Confusion Over Cash Deposits

Following demonetisation, the government made it mandatory for taxpayers to declare in their tax returns the cash deposits of Rs 2 lakh or higher from November 9 to December 30 last year. Taxpayers also have to declare the source of funds in the returns.

MULTIPLE ACCOUNTS: There is, however, no clarity in the CBDT guidelines on whether the cash held in all bank accounts should be equivalent to Rs 2 lakh or if the limit for each such account is Rs 2 lakh for declaring cash deposits.

JOINT ACCOUNTS: It remains unclear as to who is required to report cash deposits in case of joint accounts, said Doshi.

LEGAL ISSUE: The CBDT guidelines seek details on transactions rather than just the account details. This is a legal matter that needs consideration as it does not come under sub-Section 6 of Section 139 of the Finance Act that mandates declaration of cash deposits, he said.

MISINFORMATION FEARS: There is also no option of ‘not applicable’ for those with cash deposits below Rs 2 lakh in the online ITR forms, forcing taxpayers to either declare their deposits or select a ‘zero’ amount, which can be considered a misinformation, he said.

Scrutiny Of First-Time Taxpayers

Finance Minister Arun Jaitley had declared in his budget speech that income tax returns filed by those with income between Rs 2.5 lakh and Rs 5 lakh for the first time will not be scrutinised for the first year. There is, however, no such mention in the CBDT guidelines, said Doshi. There is also no separate form for those earning below 5 lakh and, therefore, the incentives for new taxpayers remain a budget promise, he said.

CONFUSION: The budget promise of lower tax rates of 5 percent instead of 10 percent for salaried individuals falling in this bracket, according to Doshi, may also not come true in this financial year. There is no clarity on whether the lower tax rate is applicable this assessment year. It will, however, be there from next year, he said.

(Updates an earlier version after the Supreme Court allowed taxpayers without Aadhaar to file income-tax returns without applying for the unique ID)