INCOME TAX – QUESTIONS AND ANSWERS :-
What is an Assessment Year?
It is the twelve-month period 1st April to 31st March immediately following the previous year . In the Assessment year a person files his return for the income earned in the previous year. For example for FY:2009-10 the AY is 2010-11.
What does the Income Tax Department consider as income?
The word Income has a very broad and inclusive meaning. In case of a salaried person, all that is received from an employer in cash, kind or as a facility is considered as income. For a businessman, his net profits will constitute income. Income may also flow from investments in the form of Interest, Dividend, and Commission etc. Infect the Income Tax Act does not differentiate between legal and illegal income for purpose of taxation. Under the Act, all incomes earned by persons are classified into 5 different heads, such as:
Income from Salary
Income from House property
Income from Business or Profession
Income from capital gains
Income from other sources
A child living abroad send Rs.20000/- per month for parent's maintenance. Would this be considered as income?
What is a return of income?
It is a prescribed form through which the particulars of income earned by a person in a financial year and taxes paid on such income is communicated to the Income tax department after the end of the Financial year. Different forms are prescribed for filing of returns for different Status and Nature of income.
From where one can get a return form?
The Public Relation Officer [PRO] can be contacted for this purpose. The form can also be downloaded from the site http://www.incometaxindia.gov.in/.
How can one know which form is applicable for the income?
One should choose a return form according to the status and nature of income from the following:
ITR1 – For Individuals having Income from Salary/ Pension/ family pension & Interest
ITR2 – For Individuals and HUFs not having Income from Business or Profession
ITR3 – For Individuals/HUFs being partners in firms and not carrying out business or profession under any proprietorship
ITR4 – For individuals & HUFs having income from a proprietary business or profession
ITR5 – For firms, AOPs and BOIs
ITR6 – For Companies other than companies claiming exemption under section 11
ITR7 – For persons including companies required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D)
ITR8 – Return for Fringe Benefits
ITRV – Where the data of the Return of Income/Fringe Benefits in Form ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6 & ITR-8 transmitted electronically without digital signature
If one fails to furnish the IT return within the due date of filing, will he be fined or penalized?
Yes. This may take the form of interest if the return is not filed before the end of the assessment year. If the return is not filed even after the end of the assessment year, penalty may also be levied.
If one have paid excess tax how and when will it be refunded?
The excess tax can be claimed as refund by filing the income tax return. It will be refunded by issue of cheque or by crediting to the bank account. The department has been making efforts to settle refund claims within four months from the month of filing return.
There are various deductions that have not been reflected in the Form 16 issued by the employer. Can one claim them in his return?
What is considered as Salary income?
Whatever is received by an employee from an employer in cash, kind or as a facility [perquisite] is considered as Salary.
What are allowances? Are all allowances taxable?
Allowances are fixed amounts, apart from salary, which are paid by an employer for the purpose of meeting some particular requirements of the employee. There are generally three types of allowances for the purpose of income tax- taxable, fully exempted and partially exempted.
Even if no taxes have been deducted from salary, is there any need for the employer to issue Form-16 ?
Form-16 is a certificate of TDS and in this case it will not apply. Howeverthe employer must issue a salary statement.
If one is getting pension through a bank/Post office who will issue Form-16 or pension statement - the bank /Post Office or the former employer?
The bank/P Office.
Are retirement benefits such as PF and Gratuity taxable?
No. They are exempt subject to conditions and limits laid down in the Income Tax Act.
Can the employer consider relief u/s 89(1) for the purposes of calculating the tax liability?
Is leave encashment taxable as salary?
It is taxable if received while in service. Received as retirement benefit, it is exempt subject to certain conditions.
What is TDS?
TDS means Tax Deducted at Source. It is the amount withheld from payments of various kinds such as salary, contract payment, commission etc. This withheld amount can be adjusted against your tax due.
Some demand has been raised by the Assessing officer after assessment. Can one pay this demand in installments or seek time till the appeal is settled?
Yes. the individual may approach the Assessing officer within 30 days of receipt of demand notice for installments or stay or seek time for payment. However it is liable to pay interest for delay in payment of demanded tax.