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Guidelines that help in filing the ITR form

The Income tax department released a new income tax return form for the assessment year 2016-17, and there are different forms available depending on the nature of an individual’s income and status. The income tax form is available in its official website www.incometaxindia.gov.in. Many individuals do not the difference between the financial year and the assessment year, the financial year is the year where an individual earns their income and also pays their taxes. For example, the income earned by an individual from April 1st, 2015 to March 31st, 2016 refers to the financial year 2015-16. The assessment year is nothing but the year that comes after the financial year in which they assess income tax of the financial year. An individual has to file the income tax return form when the financial year gets completed.

According to financial budget, there are few changes in the interest rates, according to the tax slabs. And there are certain exemptions in the case of senior citizens and super senior citizens. There are different income tax return forms available like ITR 1, 2A, 2, 4S and 4 depending on the status and income of an individual. The ITR-1 form is called SAHAJ is applicable to people who receive income from one property (house) or income from another source. And it is not applicable to the individuals, who have more than one house, who earn income from winnings, business or profession, or from capital gains.

ITR-2A is applicable to HUF and individuals who do not gain income from a profession or business or capital gains and who do not receive foreign income or have any foreign assets. And ITR-2 is applicable to HUF and individuals who do not gain income from business or professional gains or profits. The ITR-4S is known as SUGAM is applicable for HUF and individuals who chose a presumptive tax scheme of section of 44AE or 44AD. And the ITR-4 is for the individuals and HUF who run a proprietary profession or business.

People hesitate to do their duty

The Income tax department provided a data in which it shows the income tax return details. On analyzing the data we can see that only one percent of the taxpayers pay their taxes. On April 29th, 2016 the Income tax department on its official website posted the statistic data of the tax returns from the year 2001 to 2014, and a complete report on the tax return details for the assessment year 2012-13 is alone available on the site. And the department would release further details within a few days. They also said that to enhance the revenue forecasting and tax formulation many personnel, researchers, economists have made use of the data released by the department.

From the report based on the assessment year 2012-13, only two crore nine lakh people filed their income tax return, and more than half of the population have not paid their taxes. Because the statistic report for the year 2015-16 shows that the contribution by the direct tax collection was only fifty one percent. Thus, they collected the taxes through the indirect tax collection, because they failed to bring in the rich taxpayers into the direct tax collection.

In case of the indirect tax collection, it covers both the upper and the lower class of the society to pay the tax, but the expansion of the indirect policy affects the lower strata to pay more tax. So it is important for the policy makers to redraft the tax priorities and reorganize the indirect tax and direct tax ratio. The direct tax gives a clear picture that it is the main reason for the evasion.

The government should refine the policies in such a way that the upper strata contribute their share to the economy and also taxation on large farm income to expand the system, and should equalize the existing database.

Claim tax deductions on LTA, HRA using new ITR form

The Income tax department came out with a new Income tax return form for the salaried taxpayers to seek deductions.A standard Form 12BB is a new form released by the income tax department to claim the deductions on their tax based on the interest paid on home loan, LTALTC (Leave travel allowance concession) and HRA (house rent allowance). The taxpayer has to submit his name address to the Central Board of Direct Taxes (CBDT) to claim tax deduction on House rent allowance, and if the total rent paid in one year exceeds one lakh, the employee has to submit his Permanent account number (PAN) number. And in the case of the Leave travel allowance, the taxpayer has to give the proof of travel to his employer so that he can claim tax benefits.

In the Income tax Act under Section 80C the Chapter VI-A concerns to the allowable deduction, and there are other sections under the Income tax Act like Section 80TTA, 80G, 80E, 80CCD, 80CCC. The taxpayer has to submit the proof of expenditure or investments and they have to provide the name, address and PAN number of the lender to claim tax deductions on the home loan interest.

And under the Section 80C of the Income tax Act, a taxpayer can claim one lakh fifty thousand as a tax deduction amount from the threshold tax income if the amount employee spent the amount in life insurance policy, provident fund or any other schemes or policies.

The same way the Central Board of Direct taxes, extended the time to settle the TDS (tax deducted at source) while transferring immovable properties from one week to one month. And the time limit to file the quarterly TDS return in the form 24Q, 26Q and 27Q is 15 days.

CBDT provides pre-approval to foreign funds

The Central Board of direct taxes (CBDT) said that prior approval for foreign funds on tax liability in India.
According to the Income tax Act, Section 9A, when a foreign fund receives approval from the Central board of direct taxes, it will get all the benefits of Section 9A unless it is withdrawn as ’limited circumstance’.
Bijal Ajinkya, partner at Khaitan and Co said that by government policy, the subject elements, and notification of certain critical points and the fulfillment of the eligibility conditions that are the benefits of Section 9A, which will relieve the fund managers. And it will provide certainty for the foreign funds as it will remove the tax adventurism by the tax department officers.
The Income tax Act, Section 9A made it easy for the fund managers in India without any kind of tax implications in accordance to the conditions mentioned in it. According to the Act, if an institutional investor owns a fund they are not eligible. And if the fund is not expanded within the first eighteen months or at the closure, they can avail the tax-break. If they pay a fund manager for his work in two out of four years, they will not disqualify the fund.
Rajesh H Gandhi, Deloitte Haskins and Sells LLP Partner said that the Central Board of Direct Taxes gave the funds the option to check for the eligibility criteria for tax exemption. By keeping track of the proposal in 2015, these rules will encourage some funds to start an entity in India. The experts said that the rules will give an idea of the eligibility condition for a fund to determine resident ownership in India. And a fund cannot own more than twenty six percent of an entity to avail tax exemptions.

Trader’s Association of Odisha called-off the strike

The Traders Association on April 3rd withdrew their strike on the Value added tax (VAT) issue.
Traders in Odisha announced strike on April 1st, 2016 because the government imposed a tax on the essential commodities like wheat and wheat products. The traders also had to pay tax on the transportation charges and VAT at five to seven percent.
The Federation of All Odisha Trader’s Association (FAOTA) on April 3rd, 2016 announced that they call off their strike against the State government because of the imposition of the Value added tax on the essential commodities like wheat and products of wheat.
The members of the Trade Association met with the government on March 26th, to reduce the taxation on the essential commodities. Sudharkar Panda said that the State government is not interested in resolving the issue on VAT. He said that more than twenty four States in the country have exempt the tax imposed on the essential products, and that the state government of Odisha must withdraw the tax.
Sudharkar Panda, the Secretary of All Odisha Trader’s Association said that they received a written assurance from the State government that they will consider the demand of the traders. Hence they will suspend their strike unit the budget session ends on May 26th. He said that they will start their action in the future, if the government fails to fulfill their demands.
The Finance Minister, Pradeep Amat said that the ruling Biju Janata Dal government will analyze about the demands put forth by the Traders Association after the end of the assembly session. A recent report specifies that Odisha alone consumes about sixty seven thousand tonnes of pulses and twelve thousand tonnes of wheat products per month. And large amount of commodities are from the other neighboring states

NMC introduces two installments for property taxpayers

The Nagpur Municipal Corporation (NMC), launched a new system to increase the revenue from the property tax.
To enable the property owners to pay the property tax without any issues, the Nagpur Municipal Corporation (NMC) planned to release the half yearly bill of the property tax. According to the new plan, the property owners can assess their tax amount and pay the difference according to their bill.
For the property owners who pay the difference amount, the Municipal Corporation announced ten percent rebate and six percentage exemption from the tax. Among the four lakh property owners only seven hundred and ninety five owners responded to the Municipal between March 19th and March 31st.
Milind Meshram, the Assistant commissioner of the property tax department said in an interview that they will educate the owners about the self assessment of the property tax and will give a rebate of four percent. The property tax is in six months basis that is on 2 installments. The first bill is on April 31st and the interest amount is two percent if they fail to pay within the specified time limit. The property owners have ninety days to pay their property tax. And they will release the second bill by September 30th and the time limit is up to January 1st.
According to the new budget of the year 2016-17, the ex-servicemen and the current servicemen are exempt from the property tax. About one lakh and thirty four thousand taxpayers have arrear bills, and the taxpayers have not paid the bill. Hence the department is trying to delete the demand notes. And for taxpayers who paid the bill, receives arrear details and hence the department is working on these factors to ensure the taxpayers face no issues with the tax payment.
According to the new plan, there is an increase of the residential properties by 2 times and 3 times in the case of commercial properties.

Mutual fund investing and its implications

Shreya is a business woman who believes in savings, and invested in Mutual funds and Fixed deposits. She believes that the interests from her deposits will gain ten percent if the annual income is above ten thousand. But she is not sure of the implications of the Mutual fund scheme. The tax consultant said the she had to pay more for the interest amount and for her mutual fund.
The Dividend Distribution tax DDT attracts the dividends, and you can initially deduct the mutual fund and then give the rest, to the investors of the share. If you declare a dividend in the Equity oriented mutual fund, then the dividend distribution tax DDT is not applicable. The dividend distribution tax is applicable only for the non-equity oriented mutual funds like the gold funds, debt funds, etc.
Investors are tax free if their dividend is from the mutual fund. And according to the dividend distribution tax, if a mutual fund declares forty percent for a dividend, then the person who invested receives four rupees for every unit of the dividend as his holdings. And Rs.2.85 is a tax free post Dividend distribution tax amount received by the investor.
The general mistake made by the people is that, they think that the interest on the deposit is exempt if the interest is less than ten thousand per annum and taxed at ten percent if the interest income is more than ten thousand. And the bank deducts it before the payment of the interest.
But the interest acquired by the deposit is taxable at a marginal rate. Hence this income is the income received from the source and during tax liability they add it to the threshold income. Thus the investor pays tax for the tax slab amount. So an investor falls under the income tax slab at 30% with more than Rs.10 lakh p.a, and has to pay 30% of the tax on interest from the deposit.

Interest rates of the small savings benefits the customers

The cost funding formula along with the small savings rate will benefit the people who are in need of the car loan and home loan.
Whether the Governor of the Reserve Bank of India, Raghuram Rajan decrease the interest rates or not, the loans taken on products like washing machine, television, cars and home loans are going to get cheaper.
The head of fixed income and currencies of India at Deutsche Bank, Sirnivas Varadarajan said the transmission will allow the banks to reduce the deposit rates. The government has even decreased the rate of interest from sixty to one hundred and thirty basis points for the Public provident fund, Kisan Vikas Patra, etc. He said that there are three elements in this particular structure, the first one is the changing of the liquid framework, adjusting the savings rate and the other one is the lending of the marginal cost.
The government’s quarterly revision will make the savings interest rates in hand with the present rates, thus it enables the banks to incorporate with the current market rate. The Reserve Bank of India ordered the banks to refer the marginal cost of funds and lending rates (MCLR) to price the rupee loan. The lenders followed the average cost of deposits before referring the MCLR.
Rajinsh Kumar is the Managing Director of the State Bank of India said that the preceding cut of the rates should follow the lending rate. According to the formula, we have to find out the deposit’s marginal cost before finding the cost of the lending rate.

Hike in service tax eases the Service providers

The Ministry of Finance is trying out new techniques to improve the indirect tax, even when there are problems caused by the political parties on the GST. A report from the Finance Ministry said that there will be an increase in the limit of the tax paid as the service tax, and by doing so it may balance the exemption. The hike in the exemption benefits the service providers having an independent entity like interior designers, consultants, etc.
According to the tax law, if the materials of an entity are sold from its warehouse at a value less than or equal to one lakh fifty thousand, then the factory can avail tax exemption from the service tax. And in the current status, if a service provider’s annual profit is less than ten lakh then they can claim tax exemption. The officials from the government said that there can be an increase in the exemption up to twenty five lakh from ten lakh. But the GST council members have not yet decided about this plan. Get Service Tax Registration related details from Uptra consultancy Services.
A committee headed by Arvind Subramanian suggested certain Goods and Service tax rates like the ‘sin’ tax for aerated drinks and car, reduced tax rate at 12% for clothes and medicines. In recent times, the government rejected the cenvat credit to the ride hailing entities and telecom service providers. The Cenvat credit is a scheme in which the output service can set-off the taxes that the input service will pay.
The Indirect tax partner, Bipin Sapra said that the GST will provide a continuous credit structure for the input taxes. And the growth of input tax credit will enhance both the service providers and the manufactures.

Pre-approval mechanism by the IT department

The Income tax department introduced a new mechanism so that the funds can get tax exemptions.
In the Financial budget 2016, the Finance Minister Arun Jaitley has said that, to move the fund managers to India he changed certain regulations in the norms of the Permanent establishment. According to the norms, the Permanent establishment does not only consider the physical presence of the fund. This rule may lead to further consequence in taxation.
Under Section 9A of the Income tax department, the fund manager can get a prior approval from the income tax department to avail tax exemption based on the pre-approval mechanism. This will encourage the offshore fund in the country. Thus the Act deals with the revenue acquired in the country, and it is taxable in India.
The income tax department introduced a new mechanism to find out the number of investors involved in the fund. So, if an institutional firm invests in the fund, the interest of the investor in the fund depends by analyzing the firm. And the eligibility criterion for the entity is, it should have at least twenty five members.
The leader of the financial tax and the regulatory tax, Sameer Gupta said that the new norms are an initial stage for enabling the foreign investment in local management. The eligibility norm does not only provide a qualification to the Central Board of Direct taxes, it also gives the tax result of the fund. And fund’s eligibility is considerable only if they pay the fund manager, and they should perform transaction within 3 out of 4 years with an unrelated source.
A change made by the income tax department on pricing does not affect the eligibility of the fund. And for the fund to avail income tax exemptions, it should own more than twenty six percent of the company.