An Income Tax Return (ITR) is a declaration that you have an income for which you have paid tax. Filing of ITR is a mandatory obligation where you detail your income from salary and other sources, allowances and reliefs claimed, and investments made through the financial year (FY). ITRs have to be filed in the assessment year following the financial year during which income was earned.
Previously, one could file income tax returns for the previous two years; this has now been reduced to one year. Tax returns must be filed by the deadline of July 31, 2017, where income earned during FY 2016-17 will be accounted for.
In this article, we highlight the key steps necessary for filing tax returns in India.
A Permanent Account Number (PAN) is absolutely necessary for filing income tax returns. It is a ten-digit number that is issued by the income tax department of India. It is issued in the form of a laminated card and will be used as your ID when registering on the Central Board of Direct Taxes’ (CBDT) website.
From July 1, 2017, it is mandatory for you to quote your twelve-digit Aadhaar number and to link it with your PAN card for filing income tax returns in India. Aadhaar is a unique identification number for every individual resident of the country. It works just like the Social Security Number in the US, and is issued by the Unique Identification Authority of India (UIDAI).
There are several ITR forms prescribed for different classes of taxpayers. In the FY 2016-17, the CBDT notified simplified ITR forms and reduced the number of forms from nine to seven.
To check the type of form you need to apply for filing an income tax return, please click here.
Income tax slabs and tax rates are different for different categories of taxpayers.
The Government may review the different tax slabs during the Union Budget, which is presented every year in the month of February. The respective income tax slabs for individual residents below age of 60 years and for businesses for the FY16-17 and FY17-18 are shown below. There are separate rates for senior individual residents (above 60 years) and ‘super senior’ individual residents (above 80 years).
In addition to the tax and surcharge, education cess @ 2 percent, and secondary and higher education cess @1 percent will also be levied on the total tax computed. This cess is applicable on all the categories of taxpayers mentioned above.
Companies and individuals not working in India but earning income from the transfer of capital assets situated in India are liable for tax. The tax rates for capital gains are given in the table below:
You should then calculate your tax returns against the above rates of tax. You can use the tax calculator on CBDT’s website to do this. Make sure that the information you enter is absolutely accurate, otherwise your tax return application will be rejected.
After using the tax calculator, you can then follow the prompts on CBDT’s website to complete your tax return. Alternatively, you can use a non-government website to perform the tax return for you, but these will invariably charge a fee for doing so.
The income tax department has also introduced e-filing facility for filing of income tax returns. The ITRs forms are available for filing on the e-portal of their department.
Having completed your tax return, ensure that you retain printouts and statements of your taxable income in the event that you are contacted by the tax authorities.
Editor’s Note: This article was first published in October 2014 and has been updated on April 27, 2017 as per the latest regulations. Read our previous article outlining the seven new Income Tax Return forms for the financial year (FY) 2016-17 and assessment year (AY) 2017-18 here.
This article was first published on www.india-briefing.com.
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia's complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and emerging ASEAN, we are your reliable partner for business expansion in this region and beyond.
The information provided in this article is for general information purposes only. The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.
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