Returns simplified taxpayers
Individuals need to make more disclosures in the onepage form, including linking of tax returns with Aadhaar
The income-tax department has notified a simplified one-page tax-return form aimed at making it easier for taxpayers to file their annual returns.
At the same time, the new form also requires taxpayers to make additional disclosures —including mandatory linking of tax returns with an individual’s Aadhaar number — which will help curb tax evasion.
Not only will this make it easier for 50% of the country’s 40 million taxpayers and encourage more people to file their tax returns, the new disclosures will also encourage better compliance.
A press release issued by the tax department says individuals earning up to ₹50 lakh and possessing one house will need to file only a single-page tax return form called ITR-1 (Sahaj) for financial year 2016-17.
However, the department has mandated that the taxpayer will have to disclose any cash deposit above ₹2 lakh made during November 9 and December 30 as it moves to track instances where high-value cash deposits post-demonetisation do not match with the income profile of the taxpayer.
Further, in line with the changes proposed to the incometax Act, providing the Aadhaar number or the Aadhaar enrolment number in the I-T return form has been made mandatory.
The tax department has also rationalised various columns relating to tax computation and deductions for easy compliance.
“This will reduce the compliance burden to a significant extent on the individual taxpayer. This initiative will benefit more than two crore taxpayers who will be eligible to file their return of income in this simplified form,” said the income-tax department in a statement.
However, taxpayers who have more than one house will have to file a much more detailed ITR-2.
The number of income-tax return forms have also been reduced from the existing nine to seven. Further, only those individuals above the age of 80 years or whose income does not exceed ₹5 lakh and have not claimed any refund of income tax will be able to file paper returns.
Earlier, taxpayers filing ITR-1 and ITR-2 could file paper returns and claim a refund.
Also, the tax department has now made it mandatory to report exempted long-term capital gains in the tax return form; dividend income also has to be disclosed. “The government has shifted focus to those earning upwards of ₹50 lakh and having income from sources other than salary with multiple home ownership. Income-tax return filing will be detailed for them. Besides, the government has kept up the momentum on efforts of demonetisation,” said Archit Gupta, founder and CEO of Cleartax, a website which helps people file tax returns.
Around 37 million people filed their income-tax returns in 2015-16, of which 9.9 million reported annual income below the exemption limit of ₹2.5 lakh, 19.5 million reported an annual income between ₹2.5 lakh and ₹5 lakh, 5.2 million showed income between ₹5 lakh and ₹10 lakh and only 2.4 million people showed income above ₹10 lakh, according to the tax department.
Further, only 172,000 people reported income above ₹50 lakh in the entire country. A majority of the individual assessees reporting income above ₹5 lakh were from the salaried class.
RATE CUTS
According to the finance ministry notification, the interest rate on a savings accounts with post offices will stay at 4% annually, whereas all other schemes will fetch 0.10% less starting next quarter. Investments in PPF will fetch an annual interest rate of 7.9%, compared to 8% in the quarter ending March 2017; similarly five-year National Savings Certificate will give interest of 7.9% instead of 8%. KVP investments will now provide 7.6% return and mature in 113 months.
SHOULD YOU KEEP INVESTING?
“0.10% decrease in the interest rate of PPF is not huge in the current falling interest rate scenario Given that PPF still offer a return of 7.9%, that too tax free, which no other instrument provide, one can continue investing in it,” said Suresh Sadagopan, founder, Ladder7 Financial Advisories, a Mumbai-based financial planner
However, when it comes to other small savings schemes such as time deposits, where returns are not only low but are taxable too, “one should look for alternatives,” Sadagopan suggested.
“An investor can consider investing in a debt mutual fund instead, if the time horizon for investment is more than three years. Though debt mutual funds will also provide similar returns but available indexation benefit while calculating tax on return will increase the investor’s overall profit.”