Income Tax Deduction in India

Every individual who earns an income in India is supposed to pay Tax on the Income earned by him during that financial year to the government of India. Calculation of the Income Tax to be paid by an individual is a cumbersome process. The government of India provides certain benefits to its citizens who earn an income in the country by means of deductions, exemptions etc. Before going into the details below are the items that would be covered in this article. 


1. Heads of Income 
a. What exactly qualifies to be an income, for which you need to pay Tax. 
b. Salary Perquisites that are taxable
2. Deductions
a. House Rent Allowance – HRA
b. Leave Travel Allowance – LTA
c. Medical Allowance
d. Transportation Allowance
e. Interest paid on Housing Loan
3. Exemptions
a.Under Section 80C 
b. Under Section 80D 
c. Under Section 80DD
d.Under Section 80DDB
e.Under Section 80E
f.Under Section 80U

4.Clubbing of Minor Income

Heads of Income: 
The Heads of Income includes the types of income earned by an individual that would qualify as Income for which he/she needs to pay tax. These include the components that would be earned by an individual through employment with an organization/company. They are: 
1. Salaries & Wages 
2. Bonus & Commissions 
3. Other Perquisite benefits 

According to the IT laws Perquisites include the following: 
a. Rent free accommodation or concessional rate accommodation received from the employer
b. Any other benefit given by the employer either in cash or material (Apart from monthly Salary) 
c. Any Fringe benefits provided by the employer (This would include Mobile bill reimbursement, Petrol expenses etc) 

Deductions on Income: 

As per the IT regulations, there are certain deductions that are allowed on the income earned by an individual. These amounts can be subtracted while arriving upon the net taxable salary of an individual. 

They include: 
1. Housing Rent Allowance (HRA) 
The HRA is usually a part of the salary/wages paid out to an employee by the employer. The deduction on HRA is eligible to any individual who is residing in a rented house and is paying rent to the house owner. There are some rules that govern the limit till which HRA can be deducted from your taxable income. Out of the below mentioned 3 items whichever is LEAST will be considered for the purpose of deduction under the HRA component. 
a. Actual amount of the HRA paid by the employer (As part of Salary) Or
b. 50% of Basic salary in case of Metros (Delhi, Bombay, Calcutta & Chennai) or 40% of Basic salary in case of non Metros. Or
c. Actual rent paid by the individual – 10% of Basic salary 
For e.g., your monthly Basic salary is Rs. 12,000/- and the HRA component as per your salary is Rs. 6000/- and the actual rent you are paying is Rs. 6000/- in Chennai then the amount you would be eligible for HRA exemption is Rs. 4800/- (Actual rent – 10% of Basic salary) per month. 

2. Leave Travel Allowance (LTA) 
LTA also is usually a part of the salary paid out to an employee as part of his employment. As per the Indian tax laws you are eligible to claim an amount that less than or equal to the total LTA paid out to him by his employer. This would cover the expenses incurred in travel of self with/without dependents. (Dependents would include spouse, children and dependent parents) There are some conditions which need to be satisfied for an individual to claimexemption under LTA. They are: 
a. LTA can be claimed only twice in a block of 4 financial years. You cannot claim LTA every year. 
b. Only Transportation expenses would be considered for LTA. Accommodation & food expenses are not considered. 
c. For an employee to be eligible for claiming LTA, he/she should have taken at least 3 days of earned leave from the employer 

3. Medical Allowance 
Medical allowance is also a part of the salary paid out to an employee. The maximum amount eligible for this component is either Rs. 15,000/- or the actual amount paid out to you as part of Salary. To claim exemption under this you need to provide medical bills to substantiate your claim of having incurred medical expenditure. The medical bills can be in the name of the individual or his spouse or children or dependent parents. 

4. Transportation Allowance 
The IT laws permit a deduction of Rs. 9,800/- as a standard transportation allowance to all resident individuals who pay income Tax. This amount is standard irrespective of the job/industry the individual is employed. Also this amount does not change irrespective of the means of transport you use to commute to your office. 

5. Interest Paid on housing loan 
The IT laws permit an individual who has taken a home loan from a recognized bank for the purpose of construction or purchase of a residential property to claim exemption on tax on the interest part of the loan taken by the individual. There is a limit to this exemption which is as follows. 
a. If the property is occupied by the individual then the maximum eligible amount under this is Rs. 1,00,000/- 
b. If the property is rented out and the rental income is included in the total income earned by the individual then there is no maximum amount. The actual interest paid on the home loan can be used for deduction from total salary considered for the purpose of income tax. 
Note: Exemption is available on home loans taken to purchase residential property only. Home loans taken to purchase land do not qualify for income tax exemption. 


Income Tax Exemption: 

The Income Tax laws allow all individuals who are assessed for income tax to claim exemption from income tax under the following heads. 
1. Section 80C 

The section 80C of the IT laws provide exemption from income tax on amounts that are invested by the individual. This usually includes the amount theindividual invests in certified instruments that are exempt from tax. They are: 
a. PF – Provident Fund (A portion of your salary is deducted by your employer as PF and would be remitted to the PF house that is maintained by thegovernment of India. A maximum of 12% of your basic Salary is eligible for exemption from income tax) 
b. PPF – Public Provident Fund – A maximum of Rs. 70,000/- per financial year. 
c. ELSS – Equity Linked Savings Scheme (Mutual funds) 
d. NSC – National Savings Certificate
e. KVP – KisanVikasPatra
f. Life Insurance (Insurance provided by LIC & Other registered Insurance companies) 
g. Tax Saving ULIP’s – Unit Linked Insurance Plans
h. Principal amount repaid as part of the Home loan
i. 5 year bank fixed deposits
A point to be noted here is that the sum total of all these components can be a maximum of Rs. 1,00,000/- per financial year. 

2. Section 80D 

This section of the IT laws provide exemption on the premium paid towards Medical insurance of the individual, spouse & children and also dependent parents. The maximum eligible amount under this section is Rs. 15,000/- per financial year. 

3. Section 80DD 

Exemption under sec 80DD is available to any individual who: 
a. Incurs any expenditure for the medical treatment, training and rehabilitation of a disabled dependent Or 
b. Deposits any amount in schemes of the LIC of India for the maintenance of the disabled dependent. 
A deduction of Rs. 50,000/- is available to all individuals who incur any of the above two said expenditures. Where the dependent has a Severe disability a deduction of Rs. 1,00,000/- is allowed. An individual should furnish a copy of the issued certificate by the medical board constituted either by the Centralgovernment or a state government in the prescribed form, along with the return of income of the year for which the deduction is claimed.

4. Section 80DDB 
An individual, resident in India spending any amount for the medical treatment of specified diseases affecting him or his spouse, children, parents, brothers and sisters and who are dependent on him, will be eligible for a deduction of the amount actually spent or Rs 40,000, whichever is less. 

For any amount spent on the treatment of a dependent senior citizen an individual is eligible for a deduction of the amount spent or Rs 60,000, whichever is less is available. The individual should furnish a certificate in Form 10-I with the return of income issued by a specialist working in a government hospital. 


5. Section 80E 
Under this section, deduction is available for payment of interest on a loan taken for higher education from any financial institution or an approved charitable institution. The loan should be taken for either pursuing a full-time graduate or post-graduate course in engineering, medicine or management, or a post-graduate course in applied science or pure science. There is no upper limit and the entire interest amount repaid each year to the bank for a period of 8 years is exempt from income tax

6. Section 80U - It is deduction in the case of a person with a disability. An individual who is suffering from a permanent disability or mental retardation as specified in the persons with disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 or the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999, shall be allowed a deduction of Rs 50,000. In case of severe disability it is Rs. 75,000. 

The Income tax assessee should furnish a certificate from a medical board constituted by either the Central or the State Government, along with the return of income for the year for which the deduction is claimed. 
Note: Section 80U is available only for individuals who are disabled but still earn an income that qualifies for income tax. 

For more information and free consultation on taxes and auditing and assurance service please visit http://www.neerajbhagat.com

20 Types of Taxes in India

Types of taxes

Ever since I started working full time & earning at age of 23 years, I have started complaining to my father see how much I paid in taxes, my father always use to say “if you have started paying taxes its good thing that you earned an income.”

How many of you actually love to pay tax & how many of you know that government ask us to pay tax via 20 different manners?  In this article I will provide you brief information about these 20 taxes in India.

Also Read – 20 Tax Free Incomes in India

Tax is imposing financial charges on individual or company by central government or state government. Collected Tax amount is used for building nation (infrastructure & other development), to increase arms and ammunition for defense of country and for other welfare related work. That’s why it is said that “Taxes are paid nation are made”.

Type of Taxes in India:-

Direct Taxes:-

These types of taxes are directly imposed & paid to Government of India. There has been a steady rise in the net Direct Tax collections in India over the years, which is healthy signal. Direct taxes, which are imposed by the Government of India, are:

(1)   Income Tax:-

Income tax, this tax is mostly known to everyone. Every individual whose total income exceeds taxable limit has to pay income tax based on prevailing rates applicable time to time.

By doing investment in certain scheme you can save Income Tax.

(2)   Capital Gains Tax:-

Capital Gain tax as name suggests it is tax on gain in capital. If you sale property, shares, bonds & precious material etc. and earn profit on it within predefined time frame you are supposed to pay capital gain tax. The capital gain is the difference between the money received from selling the asset and the price paid for it.

Capital gain tax is categorized into short-term gains and long-term gains. The Long-term Capital Gains Tax is charged if the capital assets are kept for more than certain period 1 year in case of share and 3 years in case of property. Short-term Capital Gains Tax is applicable if these assets are held for less than the above-mentioned period.

Rate at which this tax is applied varies based on investment class.

Example:-

If you purchase share at say 1000 Rs/- (per share) and after two months this price increased to 1200 Rs/-(per share) you decide to sale this stock and earn profit of 200 Rs/- per share. If you do so you have to pay Short term CGT (capital gain tax) @ 10% +Education cess on profit as it is short term capital gain. If you hold same share for 1 year or above it is considered as long term capital gain and you need not to pay capital gain tax.it is considered as tax free.

Similarly if you purchase property after two year if you find that property price in which you invested has increased and you decide to sale it you need to pay short term capital gain tax.

For property it is considered as long term capital gain if you hold property for 3 years or above.

(3)   Securities Transaction Tax:-

A lot of people do not declare their profit and avoid paying capital gain tax, as government can only tax those profits, which have been declared by people. To fight with this situation Government has introduced STT (Securities Transaction Tax ) which is applicable on every transaction done at stock exchange. That means if you buy or sell equity shares, derivative instruments, equity oriented Mutual Funds this tax is applicable.

This tax is added to the price of security during the transaction itself, hence you cannot avoid (save) it. As this tax amount is very low people do not notice it much.

Current STT Rates are:-

Tax Rates

(4)   Perquisite Tax:-

Earlier to Perquisite Tax we had tax called FBT (Fringe Benefit Tax) which was abolished in 2009, this tax is on benefit given by employer to employee. E.g If your company provides you non-monetary benefits like car with driver, club membership, ESOP etc. All this benefit is taxable under perquisite Tax.

In case of ESOP The employee will have to pay tax on the difference between the Fair Market Value (FMV) of the shares on the date of exercise and the price paid by him/her.

(5)   Corporate Tax:-

Corporate Taxes are annual taxes payable on the income of a corporate operating in India. For the purpose of taxation companies in India are broadly classified into domestic companies and foreign companies.

corporate tax

In addition to above other taxes are also applicable on corporates.

 Indirect Taxes:-

 (6)   Sales Tax :-

Sales tax charged on the sales of movable goods. Sale tax on Inter State sale is charged by Union Government, while sales tax on intra-State sale (sale within State) (now termed as VAT) is charged by State Government.

Sales can be broadly classified in three categories. (a) Inter-State Sale (b) Sale during import/export (c) Intra-State (i.e. within the State) sale. State Government can impose sales tax only on sale within the State.

CST is payable on inter-State sales is @ 2%, if C form is obtained. Even if CST is charged by Union Government, the revenue goes to State Government. State from which movement of goods commences gets revenue. CST Act is administered by State Government.

(7)   Service Tax:-

Most of the paid services you take you have to pay service tax on those services. This tax is called service tax.  Over the past few years, service tax been expanded to cover new services.

Few of the major service which comes under vicinity of service tax are telephone, tour operator, architect, interior decorator, advertising, beauty parlor, health center, banking and financial service, event management, maintenance service, consultancy service

Current rate of interest on service tax is 14%. This tax is passed on to us by service provider.

(8)   Value Added Tax:-

The Sales Tax is the most important source of revenue of the state governments; every state has their respective Sales Tax Act. The tax rates are also different for respective states.

Tax imposed by Central government on sale of goods is called as Sales tax same is called as Value added tax by state government.VAT is additional to the price of goods and passed on to us as buyer (end user). Around 220+ Items are covered with VAT.VAT rates vary based on nature of item and state.

Government is planning to merge service tax and sales tax in form of Goods service tax (GST).

Also Read:- Download new 15G/15H Forms

(9)   Custom duty &Octroi (On Goods):-

Custom Duty is a type of indirect tax charged on goods imported into India. One has to pay this duty , on goods that are imported from a foreign country into India. This duty is often payable at the port of entry (like the airport). This duty rate varies based on nature of items.

Octroi is tax applicable on goods entering in to municipality or any other jurisdiction for use, consumption or sale. In simple terms one can call it as Entry Tax.

(10) Excise Duty:-

An excise or excise duty is a type of tax charged on goods produced within the country. This is opposite to custom duty which is charged on bringing goods from outside of country. Another name of this tax is CENVAT (Central Value Added Tax).

If you are producer / manufacturer of goods or you hire labor to manufacture goods you are liable to pay excise duty.

At some of places you need to pay tax in order to use infrastructure (road, bridge etc.) build from your money given to government as Tax. This tax is called as toll tax. This tax amount is very small amount but, to be paid for maintenance work and good up keeping.

So in total you pay 20 different taxes in direct or indirect way. At the end in order to make you laugh i will tell you one small joke on tax

Tax audit in India

Modi's government plans cashless coup with tax incentives on electronic payments

India has unveiled plans to cut transaction costs for electronic payments, to spur retailers and consumers to use less cash, as part of Prime Minister NarendraModi's drive to pull more people into the formal economy and boost public revenue.

India is among the most cash-intensive economies in the world, with a cash-to-GDP ratio of 12 per cent, almost four times that of markets such as Brazil, Mexico and South Africa, global payments company MasterCard estimates.

Many small Indian businesses and consumers now prefer cash, to avoid high transaction costs of up to 3 percent on electronic payments, as well as to escape sales tax.

In a draft proposal posted on the finance ministry website late on Monday, the government recommended tax concessions to reduce the cost of credit, debit and online payments. The proposals will be implemented gradually after June 29.

If successful in increasing card payments, the new measures will be a boost for global and debit card companies MasterCard , Visa and American Express, as well as domestic rival RuPay and mobile payment banks.

"It is a big economic reform of the Modi government that will ease conducting business by consumers and merchants," said A.P. Hota, chief executive of RuPay's parent, the National Payment Corp of India (NPCIL).

NPCIL, with 165 million cards, expects a jump in business once transaction costs are lowered, including those on state-run Indian Railways and retail petrol pumps, he said.

Modi is also rolling out banking services for all households and shifting the payment of state subsidies into people's bank accounts, moves intended to deepen the financial system and deter fraud.

Finance Ministry officials said the central bank and telecom operators had already been consulted on the new plan.

"The scheme aims to make the life of consumers easier," said finance ministry spokesman D.S. Malik.

One proposal is to offer sales tax rebates of 1 to 2 percentage points to merchants who report at least half of their transactions through online payments.

Consumers could get an income tax rebate for electronic payment of a proportion of their expenses, the draft said

         Accounting Outsource to India

In general, outsourcing is a trend that has been on the rise due to several obvious advantages. The market place is a high-pressure environment. With competitors constantly cutting into your profit margins and market share, the only area that you can try and out do them is by being more operationally efficient. For the best result to be achieved, resources need to be collaborated and optimized. Therefore, the CFOs of many companies have deemed it practical and smart to entrust their accounting services to third party firms who specialize in these services and understand regulatory and compliance requirements for legal and taxation purposes.

With India emerging as a much sought-after outsourcing destination and meeting all global benchmarks, any companies worldwide, especially in the United States have outsourced their accounting services here. Many successful companies have popped up across the country in response to this rising demand. They have carved a special niche for themselves and have been successfully helping American companies streamline their operational models and gain better control over their data and analytics. Account Outsourcing companies in India have successfully helped their clients align their long-term goals with their everyday operations.

The outsourcing companies are comprised of a network of professionals dedicated to providing competent accounting services that include the standardization of certain accounting practices including recurrent transactions which makes the overall financial processing much simpler and clear-cut. In the long run it is highly cost-effective. Companies can leverage the collective expertise of this group of specialists and tap into their extensive industry knowledge. They can shift their focus entirely to the core of the business and its long-term goals as opposed to being engaged in the everyday drudgery of bookkeeping andaccounting service.

These organisations being highly customer-centric understand the specific requirements of their client and come up with the most effective solutions which usually tends to be beyond the competency of the company to do it on its own. Even some CPAs today outsource accounting services to overseas firms to save time required to train and supervise accountants and labor costs to hire and pay them. The fundamental logic behind outsourcing is increasing productivity and efficiency.

Also, many small or medium sized firms may not be able to procure in-house support for their financial services. Outsourcing with the US may not be viable either. For such companies outsourcing in India becomes an attractive option where they can acquire the services of a thoroughly professional organisation at very affordable prices and successfully run their business without unnecessary hassles. Even some larger firms may consider this to further reduce their operational cost.

There is also the added advantage of scalability and agility. There are times when your company will need to expand and consolidate; others where you may need to cut back either due to economic restraints or to rapidly pursue a short-term goal. This will be enabled due to the customized professional support that an outsourcing firm of experts can provide

How to restructure your income, investments and expenses to optimise your tax

A Person, a 32-year-old manager in a Chartered account firm, is worried about his tax outgo. Lamba's company deducts more than Rs 10,000 as TDS every month from his salary. Lamba should rejig his salary structure. Instead of the high special allowance, his employer can put up to 10per cent of his basic salary in the NPS under Sec 80CCD2. He should also ask for perks such as newspaper and phone allowance which are tax free on submission of bills. These two measures will reduce his annual tax bill by Rs 20,000.

Lamba's tax planning also needs a rejig. He is putting too much in the PPF. Instead, he should put Rs 50,000 in the NPS under the new Section 80CCD1b. That will cut his yearly tax by Rs 10,000. He should also consider investing in ELSS funds or go for a low-cost online Ulip for better returns. Lamba is repaying a home loan but cannot avail benefits since the house is not self-occupied. He should give it out on rent and enjoy full deduction of the Rs 3.62 lakh he pays in interest. The rent (Rs 7,000 per month) will be taxed after a 30per cent standard deduction. But the deduction of the interest will cut his overall tax by almost Rs 62,500.

ICAI vision 2030

"World's leading Accounting body,          

 a Regulator and Developer of trusted and independent professionals

with world class competencies

in Accounting,assurance,taxation,finance and business advisoryservices"

ICAI Vision 2030 emphasizes four elements:

a) To be World’s leading accounting body: ICAI envisions becoming the world’s leading

accounting body by playing a predominant role in setting world class standards in identified

service areas developing thought leadership and research that addresses concerns of countries,

developed, developing and under-developed.

b) A regulator and developer of Trusted and Independent Professionals: ICAI will lay

further thrust on its regulatory and developmental role that sets the highest standards of

professional and ethical conduct of its members as a core value. Each and every member of ICAI

will not only have the obligation to maintain exacting standards of clarity, transparency and

disclosure and present an independent, informed and balanced opinion but ICAI will make

examples of delinquent members to ensure this core value is embedded in the DNA of its

members.

c) With World Class Competencies: ICAI will ensure that members have the right skills to

serve global markets which are regularly updated and are relevant in the changing economic

order. ICAI will provide holistic education, effective practical training and continuous

professional development to ensure that the knowledge base of the profession keeps pace with

emerging global practices and innovations.

d) In accounting, assurance, Indirecttaxation, finance and business advisory

services: ICAI will strengthen facilities available for providing education, training and

continuous updation of knowledge as also research and development relevant in current

times to establish thought leadership in these areas where members of ICAI have been

providing services.

It sets out its Mission as

ICAI is a leverange technology and infrastructure and partner with its stakeholders to:

•        Impart word class education, training and professional development opportunities to create global professionals.

•        Develop an independent and transparent regulatory mechanism that keeps pace with the changing time.

•        Ensure adherence to highest ethical standards

•        Conduct cutting edge research and development in areas of accounting, assurance, taxation, finance and business advisoryservice

•        Establish ICAI members and firms as indian multi-national service provider.

The Mission 2030 of ICAI lays focus on following key elements:

a) Global Professionals: ICAI will develop skilled professionals with competencies to service

clients not only within India but across the globe that requires technical skills as also cross

cultural appreciation and understanding of global needs. As one of the largest producers of CAs in the world, we will make sure our members can take the rightful place in the global talent pool.

b) Independent and Transparent Regulatory Mechanism: ICAI will further strengthen and

visibly demonstrate its regulatory role through proactive, visible, timely and unbiased action. We

will create public awareness and sensitize all stakeholders to the effectiveness of the

quasijudicial role of ICAI and ensure inclusion of wider section of users of member services in carrying out ourrole as regulator.

c) Highest ethical standards: ICAI will continue to inculcate highest ethical standards amongst

its members to assist them in upholding the values that the accounting profession stands for. We

will continue to include and emphasize ethical values as part of the education and training of

students and members.

d) Cutting-edge research and development: ICAI will become the hub of valued Thought

leadership and innovation in the field of accounting, assurance, taxation, finance and business.

ICAI will devote resources and create an enabling environment to become the predominant

contributor to setting standards across the world in these fields. We will support, fund and take

up research on issues that impact has locally and globally.

e) Multi-national Service Providers: ICAI will facilitate the Indian professional services firms

and professionals to establish as multi- national service providers and help them in harnessing

global opportunities on one hand and assist them in building capabilities on the other.

Account outsourcing companies in India - Six things to know about the new income tax return forms

Having dropped the controversial provision for mandatory disclosure of foreign trips and dormant bank accounts, the Finance Ministry has finally come out with new and simplified income tax return (ITR) forms. The simplified ITR forms have been brought after the earlier version was opposed by the industry, MPs and assessees for its cumbersome disclosure norms.

The ITR forms,available in all "Indirect  taxation firms in India" which were notified last month by the CBDT for the current assessment year, had specific columns for banks accounts, IFSC Code, names of joint account holders and foreign visits, including the ones paid by companies.

The good news now is that apart from doing away with some controversial provisions, the new forms -- ITR 2 and ITR 2A -- will have only three pages and other details will have to be filled in schedules, according to a Finance Ministry statement issued recent .. 

However, "as the software for these forms is under preparation, the new forms are likely to be available for e-filing only by the third week of June. Accordingly, the time limit for filing these returns is also proposed to be extended up to August 31, 2015, for which a separate notification will be issued," says Rama Karmakar, senior tax professional at EY India.

Here are the 6 things you need to know about the new ITR forms:

1) Providing a big relief to assessees, the new ITR forms have been reduced to three. The number of pages for the new ITR forms has been reduced from 14 pages to 3, making it easier for income tax assesses. The new forms, known as ITR 2 and ITR 2A, will therefore consist of only 3 pages. Any other details that must be filled will have to be included in schedules," informs Adhil Shetty, founder & CEO of BankBazaar.com.

2) Currently individuals/HUFs with income from more than one house property and capital gains are required to file Form ITR-2. "A new ITR 2A form is proposed which can be filed by an individual/HUF that has income from more than one house property, but does not have any income from capital gains, income from business/profession, foreign assets/foreign income," says Karmakar.

3) An individual/Hindu Undivided Family (HUF), who has exempt income without ceiling limit (other than agricultural income exceeding Rs 5,000), can now file Form ITR 1 (Sahaj). Earlier, an individual with exempt income (e.g. dividend income) of more than Rs 5,000 was required to file ITR-2.

4) With regard to foreign travel details, it is now proposed that only the passport number, if available, will be required to be furnished in ITR-2 and ITR-2A.

5) The Finance Ministry has done away with the disclosure of details of dormant accounts which are not operational during the last three years. "As regards bank account details in all these forms, only the IFS code, account number of all the current/savings account which are held at any time during the previous year will be required to be filled-up. The balance in accounts will not be required to be furnished," says the Finance Ministry statement.

6) An individual, who is not an Indian citizen and is in India for business, employment or on student visa, will not mandatorily be required to report the foreign assets acquired by him during the prior years in which he was non-resident, if no income is derived from such assets during the relevant financial year.

According to tax experts, the above changes proposed in the ITR forms will provide respite to the taxpayers, including all expatriate employees working in India.

Government has simplify new Income Tax Return Forms

Having dropped the controversial provision for mandatory disclosure of foreign trips and dormant bank accounts, the Finance Ministry has finally come out with new and simplified income tax return(ITR) forms. The simplified ITR forms have been brought after the earlier version was opposed by the industry, MPs and assessees for its cumbersome disclosure norms. 

The ITR forms, which were notified last month by the CBDT for the current assessment year, had specific columns for banks accounts, IFSC Code, names of joint account holders and foreign visits, including the ones paid by companies. 

The good news now is that apart from doing away with some controversial provisions, the new forms -- ITR 2 and ITR 2A -- will have only three pages and other details will have to be filled in schedules, according to a Finance Ministry statement issued recently. 

However, "as the software for these forms is under preparation, the new forms are likely to be available for e-filing only by the third week of June. Accordingly, the time limit for filing these returns is also proposed to be extended up to August 31, 2015, for which a separate notification will be issued," says Rama Karmakar, senior tax professional at EY India. 

Here are the 6 things you need to know about the new ITR forms: 

1) Providing a big relief to assessees, the new ITR forms have been reduced to three. "The number of pages for the new ITR forms has been reduced from 14pages to 3, making it easier for income tax assesses. The new forms, known as ITR 2 and ITR 2A, will therefore consist of only 3 pages. Any other details that must be filled will have to be included in schedules," informs Adhil Shetty, founder.

2) Currently individuals/HUFs with income from more than one house property and capital gains are required to file Form ITR-2. "A new ITR 2A form is proposed which can be filed by an individual/HUF that has income from more than one house property, but does not have any income from capital gains, income from business/profession, foreign assets/foreign income," says Karmakar. 

3) An individual/Hindu Undivided Family (HUF), who has exempt income without ceiling limit (other than agricultural income exceeding Rs 5,000), can now file Form ITR 1 (Sahaj). Earlier, an individual with exempt income (e.g. dividend income) of more than Rs 5,000 was required to file ITR-2. 

4) With regard to foreign travel details, it is now proposed that only the passport number, if available, will be required to be furnished in ITR-2 and ITR-2A.

5) The Finance Ministry has done away with the disclosure of details of dormant accounts which are not operational during the last three years. "As regards bank account details in all these forms, only the IFS code, account number of all the current/savings account which are held at any time during the previous year will be required to be filled-up. The balance in accounts will not be required to be furnished," says the Finance Ministry statement. 

6) An individual, who is not an Indian citizen and is in India for business, employment or on student visa, will not mandatorily be required to report the foreign assets acquired by him during the prior years in which he was non-resident, if no income is derived from such assets during the relevant financial year. 

According to tax experts, the above changes proposed in the ITR forms will provide respite to the taxpayers, including all expatriate employees working in India, by simplifying the process of the tax return filings. For more information click here