IT Returns for Income less than 5 Lakhs-Part II: Finance Trading Times

IT Returns for Income less than 5 Lakhs-Part II

Continuning further from our previous part No IT Returns if Income less than 5 Lakhs, here we continue with the Scenario 2:

Your Net Salary mentioned on Offer Letter: 6.5 Lakhs. (however, this is NOT the basis of your net taxable income) IT Returns
What you need to check is your FORM-16 issued by the employer. The first field in that will be something like "Gross Salary". Ignore that as well and see further down. There should be a field called "Income chargeable under the head 'Salaries'". Suppose this figure is 5.8 Lakhs

Continue further down on your FORM-16, till you see a field called "Total Income". This will usually be after a field called "Aggregate of deductible amount under Chapter VIA" and just above a field called "Tax on total income".
It is this TOTAL INCOME value which will determine whether you need to file your tax returns or not.
If this "Total Income" field value is less than 5 Lakhs, then you need NOT file Income Tax returns for this assessment year.
But if this figure is above 5 Lakhs, then you need to file IT Returns.

But, hang on. There is more to it even for individuals who have this "Total Income less than 5 lakhs". See the following scenario 3 as well regarding your additional income.

Scenario 3: Along with Salary Income, I also have additional income from stock trading, other business, interest earned on Fixed deposits, savings accounts etc. :
Now this is where things get a bit complicated. Many of the individuals dont know that every single penny you earn is taxable. Whether it is the income as interest earned on your savings account or Fixed deposit accounts, any other income from other source, everything is taxable.
You are responsible to declare that income. Hence, there are 2 cases here.
1) You have declared this additional income to your Employer and it has been mentioned in Form-16 by the employer in the section "Add: Any other income reported by the employee".
If this is the case, then you again look at the "Total Income" field value as mentioned in scenario 2. If that is less than 5 lakhs, you need not file IT returns. But if that is higher than 5 Lakhs, you need to file your IT returns

2) You have additional income, but you've not mentioned it to your employer and hence it is not mentioned in your Form-16:
This is the most common case. Remember, you are required to pay taxes on every single paisa you earn.
Now, what you can do in this case is, take the "Total Income" value from your form-16. Then, add to it the Income you have from additional sources to arrive at the ""Net Total Income". If this is less than 5 lakhs, you need not file IT returns. But if that is higher than 5 Lakhs, you need to file your IT returns.

However, you MUST pay tax on this additional income also. Since it is not mentioned in your form-16, that means it has not been taxed. Hence, it is your liability to pay taxes on this on your own.

Related: File Tax Returns: Step By Step Guide

Read first part: No IT Returns if Income less than 5 Lakhs

Scenario 4: I have a refund to claim from the IT department as additional taxes has been deducted/paid
In case you have a refund to claim, then you MUST file IT Returns, irrespective of the fact that your income is less than or higher than 5 Lakh.

Is this the concrete and full information?
No, we need to disclaim this at the moment as this is based upon the news which has come out yesterday, 31st May 2011.
The government will issue a notification very soon in the month of June 2011 exempting 'classes of persons' from the requirement of furnishing income tax returns.
The purpose of publishing this information is to provide some insights into the new IT returns requirement system, and ask the individuals to hold onto their tax returns filing till the official notification from government comes in in June. Otherwise, people end up spending a lot of money in paying the agents and TRP's for filing their returns.
We'll advise individual tax payers (who are around that 5 Lakh mark), that last date for filing returns is 31st July, so hold on till you see more clarity on this from government.

What will be the benefit of this initiative by the government?
It will help reduce a lot of paper work, and individuals will file returns for only genuine refund cases. Basically, it was becoming a case of duplicating the information from form-16 to IT Returns form. So by exempting individuals in the lower income bracket, the Income Tx department will be able to work in a timely manner only on the genuine IT returns.
It will be benficial to the individuals also, as majority of them end up paying a lot of money to TRP's and agents.
Have Comments or Questions? Please post them as comments using "Post our Comments" link below. Your queries will be responded for free in 24 hrs!

8 Comments: Post your Comments

Shyam said...(on 1 July 2011 at 05:46 )  

Sir,

What about the persons who has taken housing loan?
If "Total Income" field value is less than 5 Lakhs, after taking home loan,should IT returns be filed ? Please let me know.
Please mark a copy of your reply to i.and.only.i4@gmail.com

Thanks in Advance.

Shyam

FT Times Correspondent said...(on 1 July 2011 at 05:58 )  

Hi Shyam,

Thanks for your question. FT Times Team is always happy to help!

Since you only need to consider the "Net Taxable Total Income", which is arrived at after considering your home loan tax benefits, you will not be required to file tax returns if that net figure is below 5 Lakhs.

Don't hesitate to post another question or follow-up in case you need more details.

For more information on Home Loan Tax Benefits, please see http://www.finance-trading-times.com/2011/06/2244-tax-benefit-on-home-loan.html and http://www.finance-trading-times.com/2011/06/2249-section-80c-tax-savings-complete.html

Thanks,
FT Times

Jaiveer said...(on 14 July 2011 at 01:53 )  

Hi,

I have been serving Onshore (beyond borders) for my company and have been entitled to salary with IT deducted as per the rules of the land, do I still need to show this income in my Form 16 as my employer only includes the Income I earn in India (For the time I am in India). I though have proof and staments of the country am working in that my IT is paid in that country.

Please suggest.

Regards
Jaiveer

FT Times Correspondent said...(on 14 July 2011 at 02:18 )  

Hi Jaiveer,

Thanks for your query.
What you have described is a common situation for many Indian IT workers.

The solution to your question lies in your status - Since you are working and earning abroad with local salary and local tax deductions of that country, have you attained NRI (Non-Resident Indian) status?
If yes, then you could avoid double taxation (i.e. tax payment overseas and tax payment on the same overseas income again in India).

Usually, an NRI is NOT required to pay taxes for his foreign income. He can simply file his tax returns (with NRI status in return form) only on the income he has in India.

So in your case, if you have the NRi status, then you can file your IT returns under NRI Category only on your Indian Income.
But if you do not have NRI status, you will have to file returns with the "Resident" status and will have to again pay tax on the net foreign income + Indian Income.

Pls dont hesitate to follow up further if there are any more questions.
Although FT Times has provided the above info, it is based upon general understanding. You acknowledge that situations vary from individual to individual so Please consult a qualified tax expert on the same, before taking a final call

Darshanbhilasi said...(on 15 July 2011 at 06:57 )  

I have not seen G.O.I. notification on exemption of tax return for less than 5 lakhs income. Can anybody confirm/provide notification detail? I shall be obliged.
Heartiest regards,
Mangat Rai.

saigsolution said...(on 15 July 2011 at 21:35 )  

Sir,

As some persons say Income Tax Department has not issued any order related to non filling of ITR for net income of Rs. 5 lakhs or below. Please clarify

Jayakumar

anjuri said...(on 31 August 2011 at 08:38 )  

I TOOK HOUSING LOAN ....TOTAL ANNUAL INCOME < 5 LAKHS FOR 2010 & 2011..FORM NO:16 I GOT.SHALL I NEED TO SUBMIT THE IT RETURNS,,,,,:)

FT Times Correspondent said...(on 1 September 2011 at 23:48 )  

Hi Anjuri,

Since you must be availing tax benefit on home loan interest and principle repayment, you are advised to file your returns. Also, there is a good enough chance that you must be having interest income (from savings bank account and fixed deposits). That again makes you an eligible candidate to file your income tax returns.

Please note that last date of filing income tax returns has now passed (it was 31st July 2011). However, you can still file your returns.
In case you dont have any extra taxes to pay i.e. all your taxes on your total income (salary, rental, interest income, etc. clubbed together) were paid in time, then you dont need to pay any penalty.
But in case you have some part of your taxes still to be paid, then you will be required to pay penalty on the remaining amount.

To see more on Home Loan related Tax Benefits, please check Home Loan Tax Benefits

Do get back to us in case you have any more queries.

Thanks FT Times

Wish you all happy and fruitful trading and investing activities with safety! = = = Post a Comment

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