The government has been trying to simplify tax return forms over the years. However, this time the focus seems to have shifted from simplification to compliance and transparency, which means there will be more details and information to be revealed in the form. “The government is getting strict with returns. Till now, individuals were not placed under so much scrutiny but with recent changes, the scrutiny is likely to increase,” says Nitin Baijal, senior director, BMR Advisors.
The look and feel of the form may not have changed but they will surely make you spend some more time. Ensure you fill your forms correctly. Here are the key changes that you need to brace for when filing your returns.
E-file your return
Individuals and Hindu Undivided Families (HUFs), whose taxable income is above Rs 10 lakh will now need to e-file their returns. You can e-file your returns directly on www.incometaxindiaefiling.gov.in or take the help of one of the portals that help you e-file your return.
A good point is that you don’t have to depend on a digital signature to complete your forms. You can submit your returns electronically and subsequently sign the ITR-V form offline and send it to the Centralized Processing Centre, CPC, in Bangalore by normal or speed post. ITR-V is a one-page document that verifies your return. Keep in mind that you need to dispatch these documents within 120 days of filing your return online.
Says Archit Gupta, co-founder, Cleartax.in, an online tax filing portal: “People are a little hesitant with digital signatures because it costs around Rs 500 and one needs to go through the hassle of KYC (know-your-client). But the flip side of sending ITR-V by post is that people forget that they have to send it. Out of 13.4 million e-filed returns, two million ITR-V did not reach the CPC after repeated reminders and deadline extensions. The income-tax department is working hard to mitigate this last step problem.”
Till last assessment year, e-filing was mandatory only for firms and companies furnishing returns in Form ITR5 or ITR6. Even individuals or HUFs who filled ITR4, meant for individuals and HUFs having income from a proprietary business or profession, and had to get their books audited were supposed to e-file their returns. “The idea behind e-filing is to ensure compliance. It is easier for the government to track returns that way. Till last year, only companies had to e-file their returns but moving on even individuals will have to e-file,” says Baijal.
Declare foreign assets
In order to check black money and unreported income, declaration of any foreign asset held by you has been made mandatory from this assessment year. In schedule FA, you will need to fill in the details of any foreign bank account held by you along with any immovable property or any financial interest in any entity. Interest in financial entity can be defined as holding stocks, bonds or having a financial relationship such as being a partner in a firm or a beneficiary in a trust.
In addition to these details, you will need to declare any other assets held by you overseas. But experts find the lack of definition cumbersome. “Even a television set can be an asset. Unless there is a clear definition of what assets are, filing returns will be very tedious. Though this is a good practice but it lacks clarity. In the US, for example, assets that one needs to report are clearly defined with a certain threshold value,” explains Sonu Iyer, tax partner and national leader, human capital mobility services, Ernst and Young.
But the worry doesn’t stop just here, “Contrary to the government’s intention of tracking black money, this will end up hurting the expat population the most. Expats who are considered residents will also need to report all their assets held abroad,” explains Iyer.
You will be considered a resident if you have spent more than 182 days in India in FY12 or have spent more than 730 days in the last seven years in India. You need to report a foreign asset only if you hold them or had them during the last financial year. So even if you closed your bank account during FY12, you will need to mention that in the form, but if you closed your bank account in the previous years, you needn’t mention that in the form.
Declaring co-ownership of property
Now at the time of filing income from house property, you will need to mention if the property is co-owned and in what percentage. So if you hold a property along with your spouse and both have an equal stake, you will need to mention that you own only 50% of the property. Accordingly, the rent you get will need to be in the same proportion. Says Sudhir Kaushik, co-founder and chief financial officer, Taxspanner.com, a tax filing portal: “The idea of co-ownership is to ensure transparency and catch people who are not reporting rental income. For example, if the property is co-owned by a housewife, the rental income is shown in her account and either it is not reported or the tax is very less.” So if you hold 50% of the property and the annual rent of the house is say Rs 6 lakh, your income from rent is Rs 3 lakh and that is what you will need to report. You will also need to mention the name and the permanent account number (PAN) of the co-owner
Section 80G: Until last year, you could report an aggregate amount of donation entitled for a deduction under section 80G, but now the government is seeking details of all your philanthropic work. In addition to reporting the amount of donation, you will also have to mention the details of the donee, such as the name, address and PAN.
Schedule TR: This schedule is meant for those who worked abroad for some time, paid tax in that country and are eligible for a tax relief in India. From now, you will also need to mention the country code and the tax identification number in addition to the tax paid and total tax relief claimed.
Illustrations by Shyamal Banerjee/Mint