Basics of Income Tax & due date extension for ITR due to COVID-19
Know the basics and update of Income Tax in India!!!
Q-What is Income Tax?
An income tax is a direct tax imposed on individuals or entities with respect to income
or profits. The Income Tax Act, 1961, mandates that the central government shall collect income tax. The Central Government
can change the income slabs and tax rates every year in its Union Budget.
In simple words ‘everyone who earns or gets an income
in India is subject to income tax’.
Q-What is Income Tax Return (ITR)?
Income Tax Returns (ITR) is a statement showing the status of person,
all their sources of revenue, calculation of income, deductions and the tax
payable or tax refund which informs government
authorities how much income an individual has earned during the financial
year.
Q-What is Income Tax slab??
The Government has categorized incomes
into different slabs and a person
pays tax depends on the particular slab they fall in. The rates on different slabs may differ based on age groups. For instance, a
resident individual, aged below 60 years, with an income less than Rs. 2.5 lacs is exempt from paying
income tax.
For instance:
The existing old regime of Income Tax Slabs for Individual Tax
Payers & HUF (Less Than 60 Years Old) for AY 2020-21 (FY 2019-20):
Income
Range
Tax rate Tax to be paid
Up to Rs.2,50,000 0 No tax
Rs 2.5 lakhs to Rs 5 lakhs 5% 5%
of your taxable income
Rs 5 lakhs to Rs 10 lakhs 20% Rs
12,500+ 20% of income above Rs 5 lakhs
Above 10 lakhs 30% Rs
1,12,500+ 30% of income above Rs 10 lakhs
Note: An additional 4% Health & education cess will be applicable on the tax amount
calculated as above.
Exceptions to the Tax Slab
All income cannot be taxed on a slab basis as
per the income tax act such as Capital
gains. Capital gains are taxed depending on the asset you own and how long
you’ve had it.
Q-Who is liable to file Income Tax Return?
As per the Income-tax Act, 1961,
- A company and firms have to file income tax return mandatorily irrespective of their incomes.
- Individuals, HUF, AOP, BOI are mandatorily required to file the return of income if the income (Gross Total Income) exceed basis exemption limit of Rs. 2.5 lakhs. This limit is Rs. 3 Lakhs for senior citizens and Rs. 5 Lakhs for super senior citizens.
- ITR filing is compulsory if one wants to get tax refund in case of any excess TDS deducted or excess advance tax paid.
- ITR filing is compulsory for a resident who has assets outside India.
Q-What are the criteria of income tax on residents
and non-residents?
Levy of income tax in India is dependent on
the residential status of a taxpayer. Individuals who qualify as a resident in India shall pay tax on their global income in India i.e. income earned in India and abroad.
However, Non-residents need
to pay taxes only on their Indian income. The residential status has to be
determined separately for every financial year for which income and taxes are
computed.
Q-What is the due date of Income Tax Return
filing?
In general, the following are the due dates
before the extension of due date recently.
Category
of Taxpayer
|
Due
Date for Tax Filing – FY 2019-20
|
Individual
|
31st
July 2020
|
Body
of Individuals (BOI)
|
31st
July 2020
|
Hindu
Undivided Family (HUF)
|
31st
July 2020
|
Association
of Persons (AOP)
|
31st
July 2020
|
Businesses
(Requiring Audit)
|
30th September
2020
|
Businesses
(Requiring Transfer Pricing Report)
|
30th
November 2020
|
Recent Update
Due to COVID-19 pandemic, The Finance Minister of India, Smt. Nirmala
Sitharaman in a press conference dated May
13, 2020 announced that the income tax return (ITR) filing deadline for FY 2019-20 has been extended to November 30, 2020 from July
31, 2020 for individual, HUF, AOP, BOI, and for businesses
requiring tax audit due date is extended to 31st
October 2020 from 30th September 2020.
Moreover, the government had earlier extended
the deadline for receiving Form-16 from June 15, 2020 to June 30, 2020 via an
ordinance dated March 31, 2020.
Q-Can I file a return of income even if my
income is below taxable limits?
Absolutely yes, you can file a return of income
voluntarily even if your income is less than the basic exemption limit.
Q-Should I disclose all my income in the return
even if it is exempt?
Yes. Income from every source including exempt income must be disclosed.
Q-Why should I file my Income tax return and
what are the benefits?
Filing tax returns is an annual activity seen
as a moral and social duty of every responsible citizen of the country. A lot
of individuals think filing tax returns is voluntary and some feel it
burdensome.
However, it is worth you to file returns
regularly even if your income not above the exemption limit to get the following
benefits.
- Easier tax refund: Not only filing your tax return regularly but even filing it on time can help you obtain a tax refund from the Income Tax authorities promptly.
- Easier loan approval: Besides viewing your credit risk ratings and your repaying capacity, almost all banks today issue vehicle or home loans only once they scrutinize your returns. The tax returns serve as additional proof that you are least likely to be a defaulter.
- Faster visa processing: Everyone knows what travel difficulties one can encounter when a visa does not arrive on time. You can avoid this by getting a three years’ copy of your tax returns. The embassies and consulates of many countries will ask for your ITRs along with other requisite documents.
- Carry forward your losses: If one files timely tax returns, can carry forward his/her losses to lower the capital gains or taxable income due. This converts into sufficient savings to the assessee.
- Avoid Penalty and prosecution: There are heavy penalties and strict provisions for not filing timely ITRs.
b)
Rs 10,000 if the tax return is filed after December 31 but before the end the
relevant assessment year, i.e., before March 31.
However, if you are a small taxpayer whose gross total income does not exceed Rs.
5 lakh then the maximum fees you are liable to pay is Rs 1,000.
Q-Which ITR Form should you fill?
The official website of the Income Tax
Department (www.incometaxindiaefiling.gov.in) lists several forms that taxpayers
may be required to fill up based on their income. To better understand the
forms available, here’s a quick guide:
ITR-1: Sahaj
or ITR- 1 is to be filed individuals being a resident (other than not
ordinarily resident) having total income up to Rs. 50 lakh, having Income from
Salaries, one house property, other sources (Interest etc.), and agricultural
income up to Rs. 5 thousand.
ITR-2: This form should be filed by Individuals and HUFs not having income from
profits and gains of business or profession.
ITR-3: This form is for individuals and HUFs having income from profits and gains of business or profession
ITR-4: (Sugam):
If you attract presumptive income,
then you need to fill this form. This form is to be filed by Individuals, HUFs
and Firms (other than LLP) being a resident having total income upto Rs.50 lakh
and having income from business and profession which is computed under sections
44AD, 44ADA or 44AE.
Other direct tax measures and relief due to COVID-19 pandemic!
The government has also reduced the TDS rates applicable for non-salaried payments such as dividends, TDS on fixed deposits, etc. As per the announcement, to provide
more funds to taxpayers, TDS for non-salaried specified payments made to
residents and rates of TCS for specified receipts shall be reduced by 25%. The reduced TDS and TCS rates will remain valid until March 31, 2021.
Download: Press release by GOI for TDS-TCS reduction:
Download: Announcement of several relief measures:
Disclaimer:
The above information is based on data
available on different sources and on the basis authors understanding of the
current tax laws and one should consult his tax consultant and should not act
on the basis of the above only.
Thanks and
Regards
PLEASE SHARE YOUR
COMMENTS AND SUGGESTIONS
CS Bhuwan Taragi
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