The Income Tax Department of India has recently introduced a lengthy instruction manual that comprises step-by-step guidelines that need to be followed for filing tax returns. This long manual contains hundreds of pages and assists the taxpayers with a detailed accounting of the tax returns submitted under different headings.
This set of guidelines will be required by the individual taxpayers to fill the details in Income Tax Return Form-1 for the computation year of 2020-21 for 2019-20. Scroll down to know how these guidelines can affect the process of filing income tax returns.
Who Needs to Use This Return Form?
As per the guidelines, the Income Tax Return Form-1 should be used by an individual taxpayer resident usually not a resident) of India, whose total income for the computation year 2020-21 is not more than Rs. 50 lakhs.
Moreover, to use this return form, his income must be from any of the categories mentioned below:
- Through pension or salary
- Income from a house property
- Revenue from the interest generated or from family pension taxable through other sources
If any other family members’ such as spouse’s minor child’s income needs to be clubbed with that of the assessee, then this return form can be availed if the total income qualifies the categories mentioned above.
Who Does Not Need This Return Form?
Certain restrictions regarding the use of this return form have been mentioned in the set of guidelines released by the Income Tax Department of India. Let’s see which individuals will not be able to avail of this return form.
This return form will not be available to the following individuals:
- A person who functions as the Director of a company
- If an individual has held any unlisted equity share in the previous year
- One who earns from sources located outside the country
- If the person concerned has any asset located outside India (also includes a financial interest in any asset)
- A person who holds signing authority for any account that is not located in India
Moreover, this return form can not be used by people who have earned their income through any of the following sources in the previous year:
- Profit or loss incurred in any business or profession
- Earnings gathered from more than one home property
- From capital gains
This form should also not be used if the income generated under the head ‘Other Sources’ includes any of the follows:
- Earnings from lottery
- If agricultural income is more than Rs. 5,000
- Maintenance and possession or racehorses
- Revenue taxable at marked rates according to Section 115BBDA or Section 115BBE
Furthermore, no individual can use this return form if he has any claims of deduction/loss/ tax credit/ relief of the below-mentioned nature:
- Any loss brought forward or can be carried forward under the heading, ‘Income from House Property’
- A loss incurred under the head ‘Income from other sources’
- Any claim for relief made under Section 90 and/ Section 91
- Deduction availed as per Section 57 apart from the deduction made under Clause (iia) related to family pension
- Any claim for the credit of TDS (Tax Deducted at Source) by any other individual
Regulations to Fill Form ITR-2
As per the guidelines given in the new mandate, the ITR-2 form should be used by a HUF (Hindu Undivided Family) or a person who is not eligible to file tax returns via form ITR-1 and one who has no income under the category ‘Profits gained from business or profession.’
Moreover, this return form cannot be availed by any person whose entire income for the assessment year 2020-21 has been earned as per the heading ‘Profits gained from business or profession.’
Guidelines Introduced for Capital Gains
According to the latest regulations, capital gains from the transfer or sale of capital assets have been modified. For long-term or short-term capital gains made on real property sales, the capital gains need to be computed separately for the two distinct properties.
When an individual has a long-term capital gain from the sale of equity shares in a company or business or unit of business trust or a unit of equity-oriented fund on which the STT has already been paid, capital gains will be assessed according to Section B7 or B5.
In the case of the capital gain made when each script or unit of the mutual fund is sold during the previous year, the computation will be made separately under Schedules 112A or 115AD (1) (b) (iii).
Moreover, the net capital gain from the sale of individual dissertations has to be aggregated and then filed automatically. The tax will then be charged at a given 10% rate in Schedule SI on the total long term capital gains (LTCG), minimized by Rs. 1 lakh for tax computation.
Important Points to Note
- According to the guidelines, the return form ITR-1 will be an attachment-less return form, and no document (including the TDS certificate) will be required to submit along with this form. All other documents attached to this return form will be returned to the person filing the tax return.
- The individual taxpayers have to deposit the amount exceeding Rs. 1 crore in one or more current accounts.
- A person filing tax returns has to report an expenditure of more than Rs. 2 lakhs spent traveling to a different country, be it for the concerned person or anybody else.
- He also has to report if an item of expenditure exceeds Rs 1 lakh for electricity consumption.
Conclusion
Paying taxes on time is one of the significant tasks needed to become a responsible citizen. Therefore, it is of utmost importance that one keeps track of the government’s modifications and guidelines. This ensures that you know all the particulars associated with the process and helps ensure a hassle-free task.
Therefore, go through the recent changes before you file your tax returns this year, and if you face any difficulties going through the guidelines, get professional assistance from us right away. Contact us today!