Basic guidelines for filing New Income Tax Return

ITR-1 to make life easy, ITR-2 may provide few challenges for Tax Payers

Gone are the days of saral form (People still doubt if they were really saral, but I bet you may have to think again after going through the new forms except ITR-1 !). The Income tax department has come with a new set of forms for assesse's to file their income Tax returns. The new forms are applicable w.e.f. 14th May,2007. The new ITR's are aimed at helping the income tax department monitor the quality of tax payers more closely and accordingly decide on measures to curb instances of Tax avoidances and bring tax rationality.

There are 8 different types of forms for different types of Tax payers. However, for readers I would focus on ITR-1 and ITR-2 unless I receive any specific request or query on the other forms. I believe ITR1 and ITR-2 would cover majority of the readers on the blog.

Here are the guidelines that tax payers have to keep in mind while deciding which ITR form to use and requirements for filing the returns

• Every individual whose total taxable income exceeds Rs. 1 lac is required to file the retun of income. For females the limit is Rs. 1.35 Lac and for Senior Citizens it is 1.85 Lac.



• Individuals who have only Salary Income and Interest Income have to fill their return in form ITR-1.



• Individuals who do not have income from Business or profession, and have income from other sources are required to file return in ITR-2.



• This means that all individuals who have income from house property or those those have income from capital gains will have to file ITR-2



• Unlike previous years, there is no need to attach Form 16 (this is the form that your employers provides you detailing you Income declared to the employer and Tax deducted at source) with your return.



• You are not required to attach any documents with your return.



• You will need to provide certain details in the AIR (Annual information report) which is a section to be filled in the ITR's. I have given below the list of activities to be captured in AIR



• The last date of filing your return is 31st July,2007. If you delay, you will be charged interest @ 1% for every month of delay.



• You would be charged a penalty of R. 5000 in addition to the above interest if you file return for FY06-07 after 31st March,2008.



• You have the option of filing the return online (will discuss this in detail later)

Annual Information Report (AIR)

AIR is the new requirement and is aimed at getting details of some significant transaction done by the individual tax payer in order to assess his tax profile. Eaelier the department used to get these informations from Banks, Credit card companies and Regisrtar's office.

Following are the key transactions to be reported in the AIR

• Cash deposits totalling Rs 10 lakhs or more in a year in any savings account. If you have more than one savings account and none of the accounts individually has a balance of Rs. 10 Lacs, you don't need to provide this detail.



• Payments totalling Rs 2 lakhs or more in the year made against bills raised in respect of a credit card. Again If you hold more than 1 credit card and you have not made any payment of above Rs. 2 Lacs on a single credit card, you don't need to provide any details in AIR.



• Payment of Rs 2 lakhs or more for acquiring units of a mutual fund. Same logic applies here. You could have invested more than 2 Lacs in various mutual fund schemes, but report in AIR only if you have made a single transacion of 2 lac or more.



• Payment of Rs 5 lakhs or more for acquiring bonds or debentures issued by a company or an institution. The logic explained above applies here also.



• Payment of Rs 1 lakh or more for acquiring shares issued by a company. Please note that this covers IPO application made for a amount of Rs. 1 Lac or more even if the allotment was lesser or nothing was alloted to you.



• Purchase property valued at Rs 30 lakhs or more. The reference point here would be the Registration amount.



• Sale of property valued at Rs 30 lakh or more. The reference point would be the value considered by the Registration authorities.



• Payment of an amount or amounts aggregating to Rs 5 lakhs or more in a year for bonds issued by the Reserve Bank of India. For example if you invested 5 lac in RBI bonds duting the year at various intervals, you still need to declare this. Single payment is not a criteria in this case.

We will discuss How to fill the ITR-1 and ITR-2 in the forthcoming posts

Link for downloading ITR forms