The exemption to file return for income up to 5 lakh looks good on paper, but nobody will be able to fulfill the conditions Your Sweet Money Observes.
The Central Board of Direct Taxes (CBDT) has made millions of Indians smile by announcing that salaried taxpayers with an annual income of up to Rs 5 lakh need not file their returns.
They won't have to spend time, effort and money in filing their tax returns. Or so they think. Given the stiff conditions, it' unlikely that anyone will be able to avail of the concession.
Here's why the CBDT's proposal is just a clever ploy, a theoretical relief that nobody will get.
According to the notification, a salaried person is exempt from filing his return for the financial year 2010-11 if he fulfills the following conditions:
· Income after allowable deductions is up to Rs 5 lakh
· Income is only from salary and savings bank interest
· Salary is from one employer
· Savings bank interest is below 10,000.
· Tax on bank interest is paid and included in From 16
The announcement comes at a time when Form 16 have already been prepared and issued to taxpayers. Will it be possible to make the necessary changes in the Form 16 at this late stage?
The second requirement that the income should be only from salary and savings bank interest is patently illogical. How many people who earn more than Rs 3-4 lakh a year will not have income from fixed deposits, mutual funds, stock trading, gold and property?
You invested in fixed deposits or NSCs to save tax or received dividend from your ELSS fund during the year, you don't make the cut for the exemption. Have you given your house on rent for even one month? Sorry, you will have to file returns.
Anybody who bought infrastructure bonds to claim deduction under Sec 80CCF is also not eligible. Only a person who has no tax-saving investments and lets all his money idle in a bank will be eligible.
Let us assume that there is indeed somebody who has no such investments and, therefore, no income other than from his salary and the interest on the bank account.
Even then, he may not be able to fulfill the conditions for exemption.
The notification says that the tax due on the interest income should have been paid and the income and the tax should be mentioned in Form 16 from the employer. The interest on bank account is credited on a half-yearly basis.
The interest from October to March gets credited after March 31. You need to be a financial expert to correctly estimate the tax due on this income and pay the right amount.
That's not all. You also need to provide these details to your employer in time for the accounts division to mention them in your Form 16.
A taxpayer's quest for filing nirvana doesn't end here. If he has changed jobs during the year, a taxpayer won't be exempt from filing his tax returns.
Given the high employee turnover rate in certain industries, such as software and IT-enabled services, very few people in these sectors will be able to claim exemption.
Even if the employer agrees to include these details in the Form 16, there will be other deductions that won't be mentioned in Form 16. For instance, any donation to charitable organisations is not mentioned in Form 16.
It is up to the taxpayer to claim deduction for the donation and this can only be done by filing the return.
Similarly, if you have carried forward losses or have a refund, you won't be able to do so if you don't file.
Remember, if you don't file your return, you also forego your right to modify your return to include any deduction you may have missed.
Only taxpayers who file their return by the due date can file a revised return. Given the plethora of paperwork required to avail of the exemption and the possible repercussions of not filing your return, it seems that spending 30-40 minutes online is a far simpler option.
