As per Income Tax Act, 1961 every assessee is required to file the Income Tax Return in the prescribed form online and pay the appropriate Income Tax, on or before the due date. The assessee can be an Individual (Resident/Non-Resident), Proprietorship Firm, Partnership Firm, LLP, Company, HUF, Trust, AoI/BoP etc.
For a Company/ Partnership Firm/LLP, it is mandatory to file Income Tax Return for every financial year. Apart from these; asseesee having income of Rs. 2.5 Lakhs or more has to file the Income Tax Return, this cut off limit is Rs. 3 Lakh for senior citizen, and those individuals who are aged 80 years or above this limit is Rs. 5 lakh. However in few circumstances, it is advisable to file Income Tax return even if the income is below Rs. 2.5 lakhs such as –
- Where the income is less than the exemption limit ie. 2.5 lakh/ 3 lakh/ 5 lakh but TDS has been deducted – in such scenario ITR has to be filed to claim the refund of TDS;
- Where a proprietor has incurred losses in business – filing ITR before due date is mandatory to carry forward the losses in next year so that the same may be set off.
There are five main sources of income which are taxed under the income tax laws :
- Income from Salary
- Income from House Property
- Income from Profits and Gains of Business & Profession
- Income from Capital Gain
- Income from Other Sources
There are different types of ITR Forms such as :
The rate of tax and the type of ITR form to be filed depends upon category of assessee and the sources of income of the assessee. It is important to know that which ITR form is to be filed, otherwise the ITR shall be treated as “Defective Return” by the Income Tax department. Also, it is very important to pay the tax correctly failing which the assessee may receive Income Tax Notice. To minimize the tax burden within the boundaries of income tax laws, one has to do in depth Tax Planning. The government also prescribes various tax saving schemes, the amount invested in these tax saving schemes may reduce the tax burden; however, one has to choose the correct tax saving scheme as per the own requirement.
Income Tax Audit
The audit required under income tax law is called ‘Tax Audit’. As the name itself suggests, Tax Audit is an examination or review of accounts of any business or profession carried out by taxpayers from the income tax It makes the process of income computation for filing of return of income easier and accurate.
Section 44AB contains the provisions relating to the class of taxpayers who are required to get their accounts audited from a chartered accountant. The audit under section 44AB aims to ascertain the compliance of various provisions of the Income-tax Law and the fulfillment of other requirements of the Income-tax Law. The report of the tax audit conducted by the Chartered Accountant is to be furnished in the prescribed form. The form prescribed for audit report in respect of audit conducted under section 44AB is Form No. 3CB and the prescribed particulars are to be reported in Form No. 3CD.
Section 44AB provides that, if a person is required by or under any other law to get his accounts audited, then it is not required to again get the accounts audited in compliance of section 44AB. Is such a case, it shall be sufficient if such person gets the accounts of such business or profession audited under such law and obtains the report of the audit as required under such other law and furnishes a report by the chartered accountant in the form prescribed under section 44AB, i.e., Form No. 3CA and Form 3CD.
A thorough and expert Income Tax Audit minimizes the probability of issuance Income Tax notices; and even in case the notice is received it can be replied effectively if the Accounts are properly Audited & the Correct Tax Audit Report is filed.
PAN & TAN
Permanent Account Number (commonly known as PAN) is a unique identification number allotted by the Income Tax department of India. It is a ten-digit alphanumeric code used to identify the tax payer. It is allotted to individual/Proprietorship Firm, Company, HUF, Partnership Firm, LLP etc. PAN is not only mandatory to file ITR but also can be used as an identity proof required to be furnished for applying of bank loan, opening Demat account, etc. A person can legally hold only one PAN.
Tax Deduction Account Number or Tax Collection Account Number (commonly known as TAN) is a unique identification number allotted by the Income Tax department of India. It is mandatory to be obtained by all the persons who are required to deduct tax at source.
Tax Deducted at Source (commonly known as TDS) refers to the amount deducted by the person making the specified payments which are mentioned under Income Tax Act, 1961. This amount is adjustable against the income tax liability of the deductee. Every person required to deduct tax at source has to deduct TDS at the specified rates and deposit the same with the Income Tax department. Also, TDS return is to be filed every quarter giving the details of TDS deducted and deposited. The rate at which the TDS is to be deducted and the exemption limit varies for different types of payment such as – salary (Section 192), payment to Contractor (Section 194C), payment to professional/technical person (194 J) etc. Wrong/Non –deduction of TDS, default in deposit of TDS, Non/Late filing of TDS return may result in imposition of interest, penalty and other legal consequences.
Tax Collected at Source (commonly known as TCS) refers to the amount collected by seller from the buyer at the time of Sale. TCS is to be collected on sale of specified goods or providing specified services mentioned under Section 206C of the Income Tax Act, 961. The seller has to file the TCS return quarterly. This tax collected at source is adjusted from the income tax liability of the buyer.
Reply to Legal Notices
The income tax department may issue the notices under IT Act for many reasons such as Non-filing of ITR, Nonpayment/short payment of income tax, TDS mismatch, Scrutiny notice etc. The notices are uploaded on the online portal and the reply is also filed online along with supporting documents if, any.
Want To check whether any notice has been issued by the income tax department :
Follow the steps below
- Login on the e-filing portal at incometaxindiaefiling.gov.in
- After the login, in the main menu “Worklist” tab appears.
- Click on this tab and a sub-menu appears “For Your Action”;
- The notices issued by the department and the outstanding demands can be checked here.
The notices received from the department must not be ignored and should be handled very carefully. Efficiently replying the income tax notice in time bound is a must and ignoring or filing unfitting reply to the IT notices may result in heavy demand of tax, interest, penalty & even imprisonment in extreme cases.
Income Tax Appeals
Any tax payer aggrieved by order passed by Assessing Officer can appeal before Commissioner of Income Tax (Appeals). Further appeal can be preferred before the Income Tax Appellate Tribunal. On substantial question of law, further appeal can be filed before the High Court and even to the Supreme Court.
There are different time limits & procedure for filing appeals before the CIT (Appeals), ITAT, High Court & Supreme Court. The appeals before CIT (A) & ITAT is filed online.