Total income should be from one employer and can include interest income from savings bank deposit
Deepti Bhaskaran, Mint 27/6/2011
If you are a salaried individual with a total annual income up to Rs5 lakh, you can stop chasing the 31 July deadline to file your income-tax returns (ITR). The Central Board of Direct Taxes (CBDT) has notified the scheme that exempts salaried individuals with a total income up to Rs5 lakh from filing returns for the assessment year 2011-2012.
Says Homi Mistry, partner, Deloitte Haskins and Sells, a tax consulting company: “The notification is perhaps useful for individuals who have very low salary. For example, individuals who have started afresh or those in the lower income group like office boys.”
What makes total income
The total income should be from your salary and from a single employer. Your total income can also include interest income from deposits in a savings bank account up to Rs10,000.
To calculate your total income, factor in all the deductions. A deduction is a straight subtraction from your income and the remainder is your taxable income. Some of the most popular deductions come under section 80C, including premiums of life insurance policies, principal repayment of home loans, savings in an equity-linked savings schemes and investments in Public Provident Fund. If you have a health insurance policy, the premiums will qualify for a deduction of up to Rs15,000 under section 80D.
What you need to do
Though you need not file your ITR, you will need to give your Permanent Account Number and details of the entire interest income from your bank to your employer. After factoring in all the deductions and exemptions, your employer will then deduct tax payable by you at source. The Form 16 that you get will reflect the tax deducted at source (TDS).
Who’s out of ambit
But if you are earning a salary from more than one employer, or have other income sources in addition to interest income from your savings bank account and salary, you will need to file your returns even if your salary is up to Rs5 lakh. Also, if you have refund claims, you will need to file tax returns.
The scheme shall also not be applicable in cases where notices have been issued for filing ITR under section 142(1) for late or non-submission of return; or section 148 for reassessment; or section 153A for search and requisition; or section 153C for any other person.
The proposal was first made in Union Budget 2011-12, when the finance minister evinced interest in notifying a category of salaried taxpayers, whose tax liability is discharged by their employers through TDS.
However, what seems to be a convenient move may actually not turn out to be a practical one. Says Sudhir Kaushik, co-founder and chief financial officer, Taxspanner.com, a tax filing portal: “From a practical standpoint, an individual should anyway file his income-tax return. It not only helps an individual keep a record of his tax history, but is also required when one wants to submit an application for a visa, a bank loan, or any such application for which one needs to furnish an authentic proof of income.”
The income-tax return receipt is an important document and is used for authentication purposes in some cases, such as getting a visa when travelling abroad or applying for a bank loan. So it may actually make sense for you to file your returns even if your total income is up to Rs5 lakh.
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