July 31 is the last date to file Income Tax Return (ITR) for FY 2018-19. As per the government data, a miniscule 4% of the population file their ITR although the successive governments have been taking several measures to bring more individuals into the tax net. The Central Board of Direct Taxes (CBDT) recently gave a directive to the I-T department to add 1.30 crore new return filers in the current financial year as part of the government's move to widen the tax base. In her maiden Budget, the country's first full-time woman finance minister Nirmala Sitharaman had proposed several changes in ITR filing that taxpayers should know if they are planning to submit their returns.
Who is required to file ITR?
An individual is required to file an ITR if his/her income from all the sources is more than the exemption limit. For those below 60 years, the exemption limit is Rs 2.50 lakh, Rs 3 lakh for individuals between 60 and 80 years. Those who have crossed 80 years enjoy higher exemption limit of Rs 5 lakh. For this purpose, one has to consider the aggregate of income from all the sources before any deduction under Sections 80C, 80 CCD, 80 D, 80G. 80 TTA, 80TB. The deduction comprises investments and expenditures like life insurance premium, mediclaim premium, donations, home loan repayments, tuition fee, bank interest, NPS, PPF and EPF contributions. Proposed changes in Union Budget.
In order to expand the tax payers’ base, finance minister Nirmala Sitharaman has proposed to expand the categories of persons who will be to file their ITR. Under the proposed changes, ITR filing is mandatory for all individuals even if their income is below the taxable limit. Individuals who spend over Rs 2 lakh on a foreign trip or pay electricity bill of over Rs 1 lakh in a year or deposit Rs 1 crore in a bank account in a year are required to file their ITR. Interestingly, an individual who deposits more than Rs 1 crore in a saving bank account is not covered under the proposed norms. Under the second category, persons proposed to be covered are based on the composition of their income. Since exempt incomes do not form part of your income, presently you are not required to consider these exempt income while ascertaining whether you are required to file an ITR or not based on the aggregate of your total income. The proposed changes include all the long-term capital gains which an assessee can claim as exempt if the taxpayer makes an investment in specified assets.
So the proposal provides that an individual who has earned any long-term capital gains makes an investment in a residential house, or capital gains bonds or invests in a start-up and thus claim exemption under Section 54, 54F, 54EC and 54G will have to consider these exempt capital gains while arriving at the exemption limit discussed above. Similarly, long-term capital gains arising on sale of agricultural income or on compulsory acquisition of land and/or building shall also be included in the amount even if you are claiming exemption by investing in another agricultural land or other land and/or building respectively under Section 54B and 54D. Likewise, any long-term capital gains arising claimed exempt under Section 54GA shall be included. The new proposal will cover cases of isolated transaction of sale of property which used to go unreported and thus were outside of the preview of scrutiny by the income tax department. A taxpayer is liable to pay late ITR filing fees of maximum of Rs 10,000. Individuals whose income is below taxable limit will not have to pay the penalty even if they fail to meet the deadline for filing ITR. An individual will have to pay a penalty of Rs 5,000 if ITR is filed after the deadline (July 31) but on or before December 31 of the assessment year, Rs 1,000 for taxpayers whose gross total income does not exceed Rs 5 lakh. (The author is a tax and investment expert and can be reached on firstname.lastname@example.org and on his twitter handle @jainbalwant)