Income Tax

Income tax is that percentage of your income that you pay to the government to fund infrastructural development, pay the salaries of those employed by the state or central governments, etc. All taxes are levied based on the passing of a law, and the law that governs the provisions for our income tax is the Income Tax Act, 1961.
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All About Income Tax

Income tax is only of the direct means of taxation like capital gains tax, securities transaction tax, etc., and there are many other indirect taxes that we pay like sales tax, VAT, Octroi, service tax, etc.

The income tax you pay every month or upon every contractual earning is what forms a large part of the revenue for the Government of India. These revenue functions are managed by the Ministry of Finance, which has delegated the responsibility to managing direct taxes (like income tax, wealth tax, etc.) to the Central Board of Direct Taxes (CBDT).

What are the Different Types of Taxes in India?

The Government of India levies two types of taxes, which are as follows:

  • Direct taxes: These can be defined as the taxes that individuals pay directly to the government. Direct taxes are further classified into two types:
    • Corporate Tax: Companies pay a corporate tax based on the profit they make from their business. The rate is pre-determined by the income tax laws of the country.
    • Income Tax: The tax that is paid by taxpayers, Hindu Undivided Families (HUFs), or individuals is the Income Tax. It is based on the income that is received by the taxpayer and the income tax laws determine the rate of tax that must be paid.
  • Indirect Taxes: Taxes that are collected by a third-party and paid to the government can be defined as indirect taxes. Restaurants, e-commerce websites, and theatres are examples of third-parties that pay indirect taxes.

Who are the Different Types of Income Tax Payers?

It is mandatory for individuals to contribute a certain percentage of their income towards taxes. The amount of tax that must be paid depends on the individual’s age and the income they make. The entities listed below must also pay direct taxes:

  • Artificial Judicial Persons
  • Corporate firms
  • Association of Persons (AOPs)
  • Hindu Undivided Families (HUFs)
  • Companies
  • Local Authorities
  • Body of Individuals (BOIs)

What Types of Income come under the Tax Slab?

Every individual, whether a non-resident or a resident, who earns a certain amount of income is entitled to pay tax. The income that is generated by the individual can be from the interest that is generated from a savings account, the pension that the individual receives, or the salary that he/she makes. The income earned can be divided into the following categories:

Type of Income Nature of the Income
Income that received via a salary The income that is received by the individual from a salary or from the pension they receive come under this category.
Income that is generated from other sources Interest that is generated from a savings bank account or from a fixed deposit.
Income that is made from capital gains Income that is generated from the sale of a house property, shares, or mutual funds.
Income that is generated from House Property Income that is received because of a rental income.
Income from Profession and Business Income that is generated by self-employed individuals, individuals that run a business, and individuals who work as freelancers and contractors. Tuition teachers, lawyers, and doctors who have their own practice, chartered accountants, and life insurance agents pay income tax under this category.

What are the Different Types of Income Tax Slabs?

Depending on the age of the individual, the three categories that resident individual taxpayers are divided into are mentioned below:

  • Individuals who are less than the age of 60 years old.
  • Senior citizens who are above 60 years old and below 80 years of age.
  • Super senior citizens who are above 80 years old.

The Income Tax Slabs (FY 2019-20 & AY 2020-21) for the three given categories are mentioned in the tables below:

  1. For individuals who are below 60 years of age:
  2. Income Range Cess and Income Tax Rates
    Up to Rs.2.5 lakh Nil
    Rs.2,50,001 - Rs.5,00,000 4% cess + 5% of the (total income minus Rs.2.5 lakh)
    Rs.5,00,001 – Rs.10,00,000 4% cess + 20% of the (total income minus Rs.5 lakh) + Rs.12,500
    Rs.10,00,001 and over 4% cess + 30% of the (total income minus Rs.10 lakh) + Rs.1,12,500

  3. Senior citizens who are between the ages of 60 years and 80 years:
  4. Income Range Cess and Income Tax Rates
    Up to Rs.3 lakh Nil
    Rs.3,00,001 - Rs.5,00,000 4% cess + 5% of the (total income minus Rs.3 lakh)
    Rs.5,00,001 – Rs.10,00,000 4% cess + 20% of the (total income minus Rs.5 lakh) + Rs.10,000
    Rs.10,00,001 and over 4% cess + 30% of the (total income minus Rs.10 lakh) + Rs.1,10,000

  5. Super senior citizens who are above the age of 80 years old:
  6. Income Range Cess and Income Tax Rates
    Up to Rs.5 lakh Nil
    Rs.5,00,001 - Rs.10,00,000 4% cess + 20% of the (total income minus Rs.5 lakh)
    Rs.10,00,001 and over 4% cess + 30% of the (total income minus Rs.5 lakh) + Rs.1,00,000

In the case of Non-resident Individuals (NRIs), the exemption limit in a financial year is Rs.2.5 lakh irrespective of the age of the individual.  

In case the net income of the individual is more than Rs.50 lakh but less than Rs.1 crore, a 10% charge is levied on the income that is payable before a 4% cess is levied. In case the income of an individual is more than Rs.1 crore, a 15% surcharge is levied.

What are the Important Dates to Remember when Paying Income Tax?

The important dates to remember for individuals who fall under the bracket to pay Income Tax for the year(FY 2019-20 & AY 2020-21) is mentioned in the table below:

Important Due Dates The task that must be completed
Before January 31 Individuals must submit their proof of investment
Before March 31 It is deadline before which any investments under Section 80C of the Income Tax Act, 1961 must be made
Before 31 July Tax returns must be filed by this date
Between October and November Tax returns must be verified by this time

What are the Different Methods by which Income Tax is Collected?

The three different methods by which the government collects income tax are mentioned below:

  • Taxes Collected at Source(TCS)
  • Taxes Deducted at Source(TDS)
  • In case taxpayers make a voluntary payment at the designated banks

Benefits of Filing Income Tax Returns

The main benefits of filing ITR is mentioned below:

  • Visa processing: In case individuals wish to travel to a foreign country, the visa processing is quicker if the ITR is submitted. Few countries make it mandatory for the ITR to be submitted.
  • Loan approval: In case individuals or businesses wish to apply for a loan from banks and Non-banking Financial Companies (NBFCs), the submission of ITR is mandatory. The loan application is rejected by the bank or the NBFC in case the ITR is not submitted.
  • Refund of tax: In case individuals pay an additional tax amount, only after the ITR is filed will the individuals be able to receive the refund.
  • Insurance can be claimed: Insurance claims are usually processed only after the ITR is submitted. In case individuals do not submit the ITR, the amount of claim will reduce significantly.
  • High-value insurance covers: In case individuals wish to purchase life cover between Rs.50 lakh and 1 crore, the ITR must be submitted. Submission of ITR helps insurers determine an individual’s annual income.
  • Losses can be carried forward: Losses such as capital loss, speculation loss, and business loss can be carried forward only when the ITR is filed before the due date. As per the income tax laws, individuals can carry forward losses for a period of 8 consecutive years.
  • Application of passport: The process to apply for a passport is quicker in case individuals submit their ITR. Submission of ITR is proof of non-ECR.  
  • Provision of tenders: A business’s value depends on the tax returns and annual income that it has made. It is much easier for contractors to acquire projects in case they file their ITR on time. In order to claim government tenders, it is important that contractors file their ITR on a regular basis and on time. Up to 7 years of ITR can be checked by the scrutiny committee before they provide tender approval.  
  • To claim a depreciation: Claim depreciation can be availed by owners of businesses in case the assets are their name or the name of the business. However, the amount that has been claimed can be used only for the purpose or the profession. This facility is available to individuals only if the ITR is filed on time.
  • Proof of income and address: The ITR can be submitted as an income or address proof.

What are the Different Types of Income Tax Forms?

The various types of Income Tax forms are mentioned below:

  • ITR 1: The form is used by individuals who receive an income via pension or salary or from one residential property.
  • ITR 2: The form is used by individuals who are from the Hindu Undivided Families (HUFs) category and receive an income that is not from their profession and business.
  • ITR 3: The form is used by individuals who come under the HUFs and make an income from their business or profession.
  • ITR 4: The form is used by individuals who are proprietors or professionals and individuals who come under the HUFs category.
  • ITR 4S: This form is also known as SUGAM, and it is available for individuals who are a part of the HUFs category and for individuals who choose to go for the SUGAM taxation scheme under Section 44 AD/AE.
  • ITR 5: Local authorities, artificial judiciary persons, AOPs, BOIs, firms, and Limited Liability Partnerships (LLPs) can opt for this form.
  • ITR 6: Companies who do not claim for exemptions under Section 11 of the Income Tax Act must opt for this form.
  • ITR 7: In case individuals need to file returns under Section 139 (4A), Section 139 (4B), Section 139 (4C), Section 139 (4D), Section 139 (4E), and Section 139 (4F), they must opt for this form.  
  • ITR-V: This form is sent as an acknowledgment when e-filing of ITR is done. Individuals must send a signed copy of the form to the Income Tax Department in Bengaluru in case they do digitally sign their form online.

What are the Penalties in case ITR is not Filed?

The various penalties that are levied in case the ITR are not filed or wrong information is given are mentioned below:  

  • ITR not filed: In case ITR is not filed as per the details mentioned under Section 139 of the Income Tax Act, a penalty of Rs.5,000 or more is levied.
  • Wrong PAN or no PAN is provided: In case individuals provide the wrong Permanent Account Number (PAN), the penalty that is levied is Rs.10,000. In case the PAN details are not updated, instead of the regular 10% TDS deduction, 20% will be deducted.
  • Not checking Form 26AS: It is vital that individuals check Form 26AS multiple time before filing their returns. In case there is any mismatch in the details that are provided, it can lead to severe punishments.
  • Attempting to evade tax: Under Section 271(C) of the Income Tax, in case individuals provide wrong details of their income or conceal income tax, a 100% to 300% of the tax that has been evaded will be levied as a penalty. According to Section 271 AAB, depending on the scenario, the penalty that is being levied will vary. The different penalties that will be levied are mentioned below:
  • 10% of the income that has been undisclosed the previous year plus the interest will be the penalty that will be levied.
  • In case the individual does not mention the details of the undisclosed amount but discloses the details when filing ITR for the previous year, 20% of the undisclosed amount plus the interest will be levied as penalty.
  • A penalty of 30% to 90% of the undisclosed amount plus the interest is levied in case individuals do not disclose the previous year’s earnings.
  • Not paying the tax amount as per self-assessment: Taxpayers will be treated as defaulters in case they make a part payment or do not make the payment of the self-assessed amount, under Section 140 A (1) of the Income Tax Act. Under Section 221(1), the amount of penalty to be levied will be decided by the assessing officer. However, the assessing officer can exempt an individual from paying the penalty in case the individual provides an explanation as to why the payment was not made on time.
  • Not following up on a notice issued by the Income Tax Department: In case individuals fail to respond to any notices that have been issued by the Income Tax Department, then under Section 142(1) or Section 143(2), the assessing officer is allowed to send a notice requesting for the ITR to be filed or request for all the details of liabilities and assets to be provided in writing.  

All About Income Tax

Income tax is only of the direct means of taxation like capital gains tax, securities transaction tax, etc., and there are many other indirect taxes that we pay like sales tax, VAT, Octroi, service tax, etc.

The income tax you pay every month or upon every contractual earning is what forms a large part of the revenue for the Government of India. These revenue functions are managed by the Ministry of Finance, which has delegated the responsibility to managing direct taxes (like income tax, wealth tax, etc.) to the Central Board of Direct Taxes (CBDT).

What are the Different Types of Taxes in India?

The Government of India levies two types of taxes, which are as follows:

  • Direct taxes: These can be defined as the taxes that individuals pay directly to the government. Direct taxes are further classified into two types:
  • Corporate Tax: Companies pay a corporate tax based on the profit they make from their business. The rate is pre-determined by the income tax laws of the country.
  • Income Tax: The tax that is paid by taxpayers, Hindu Undivided Families (HUFs), or individuals is the Income Tax. It is based on the income that is received by the taxpayer and the income tax laws determine the rate of tax that must be paid.
  • Indirect Taxes: Taxes that are collected by a third-party and paid to the government can be defined as indirect taxes. Restaurants, e-commerce websites, and theatres are examples of third-parties that pay indirect taxes.

Who are the Different Types of Income Tax Payers?

It is mandatory for individuals to contribute a certain percentage of their income towards taxes. The amount of tax that must be paid depends on the individual’s age and the income they make. The entities listed below must also pay direct taxes:

  • Artificial Judicial Persons
  • Corporate firms
  • Association of Persons (AOPs)
  • Hindu Undivided Families (HUFs)
  • Companies
  • Local Authorities
  • Body of Individuals (BOIs)

What Types of Income Come under the Tax Slab?

Every individual, whether a non-resident or a resident, who earns a certain amount of income is entitled to pay tax. The income that is generated by the individual can be from the interest that is generated from a savings account, the pension that the individual receives, or the salary that he/she makes. The income earned can be divided into the following categories:

Type of income Nature of the income
Income that received via a salary The income that is received by the individual from a salary or from the pension they receive come under this category.
Income that is generated from other sources Interest that is generated from a savings bank account or from a fixed deposit.
Income that is made from capital gains Income that is generated from the sale of a house property, shares, or mutual funds.
Income that is generated from House Property Income that is received because of a rental income.
Income from Profession and Business Income that is generated by self-employed individuals, individuals that run a business, and individuals who work as freelancers and contractors. Tuition teachers, lawyers, and doctors who have their own practice, chartered accountants, and life insurance agents pay income tax under this category.

What are the Different Types of Income Tax Slabs?

Depending on the age of the individual, the three categories that resident individual taxpayers are divided into are mentioned below:

  • Individuals who are less than the age of 60 years old.
  • Senior citizens who are above 60 years old and below 80 years of age.
  • Super senior citizens who are above 80 years old.

The tax slabs (FY 2018-2019) for the three given categories are mentioned in the tables below:

  • For individuals who are below 60 years of age:
Income that is generated Cess and income tax rates
Up to Rs.2.5 lakh Nil
Rs.2,50,001 - Rs.5,00,000 4% cess + 5% of the (total income minus Rs.2.5 lakh)
Rs.5,00,001 – Rs.10,00,000 4% cess + 20% of the (total income minus Rs.5 lakh) + Rs.12,500
Rs.10,00,001 and over 4% cess + 30% of the (total income minus Rs.10 lakh) + Rs.1,12,500
  • Senior citizens who are between the ages of 60 years and 80 years:
Income that is generated Cess and income tax rates
Up to Rs.3 lakh Nil
Rs.3,00,001 - Rs.5,00,000 4% cess + 5% of the (total income minus Rs.3 lakh)
Rs.5,00,001 – Rs.10,00,000 4% cess + 20% of the (total income minus Rs.5 lakh) + Rs.10,000
Rs.10,00,001 and over 4% cess + 30% of the (total income minus Rs.10 lakh) + Rs.1,10,000
  • Super senior citizens who are above the age of 80 years old:
Income that is generated Cess and income tax rates
Up to Rs.5 lakh Nil
Rs.5,00,001 - Rs.10,00,000 4% cess + 20% of the (total income minus Rs.5 lakh)
Rs.10,00,001 and over 4% cess + 30% of the (total income minus Rs.5 lakh) + Rs.1,00,000

In the case of Non-resident Individuals (NRIs), the exemption limit in a financial year is Rs.2.5 lakh irrespective of the age of the individual.  

In case the net income of the individual is more than Rs.50 lakh but less than Rs.1 crore, a 10% charge is levied on the income that is payable before a 4% cess is levied. In case the income of an individual is more than Rs.1 crore, a 15% surcharge is levied.

What are the Important Dates to Remember when Paying Income Tax?

The important dates to remember for individuals who fall under the bracket to pay Income Tax are mentioned in the table below:

Date The task that must be completed
Before January 31 Individuals must submit their proof of investment
Before March 31 It is deadline before which any investments under Section 80C of the Income Tax Act, 1961 must be made
Before 31 July Tax returns must be filed by this date
Between October and November Tax returns must be verified by this time

What are the Different Methods by which Income Tax is Collected?

The three different methods by which the government collects income tax are mentioned below:

  • Taxes Collected at Source(TCS)
  • Taxes Deducted at Source(TDS)
  • In case taxpayers make a voluntary payment at the designated banks

What are the Benefits of filing Income Tax Returns?

The main benefits of filing ITR is mentioned below:

  • Visa processing: In case individuals wish to travel to a foreign country, the visa processing is quicker if the ITR is submitted. Few countries make it mandatory for the ITR to be submitted.
  • Loan approval: In case individuals or businesses wish to apply for a loan from banks and Non-banking Financial Companies (NBFCs), the submission of ITR is mandatory. The loan application is rejected by the bank or the NBFC in case the ITR is not submitted.
  • Refund of tax: In case individuals pay an additional tax amount, only after the ITR is filed will the individuals be able to receive the refund.
  • Insurance can be claimed: Insurance claims are usually processed only after the ITR is submitted. In case individuals do not submit the ITR, the amount of claim will reduce significantly.
  • High-value insurance covers: In case individuals wish to purchase life cover between Rs.50 lakh and 1 crore, the ITR must be submitted. Submission of ITR helps insurers determine an individual’s annual income.
  • Losses can be carried forward: Losses such as capital loss, speculation loss, and business loss can be carried forward only when the ITR is filed before the due date. As per the income tax laws, individuals can carry forward losses for a period of 8 consecutive years.
  • Application of passport: The process to apply for a passport is quicker in case individuals submit their ITR. Submission of ITR is proof of non-ECR.  
  • Provision of tenders: A business’s value depends on the tax returns and annual income that it has made. It is much easier for contractors to acquire projects in case they file their ITR on time. In order to claim government tenders, it is important that contractors file their ITR on a regular basis and on time. Up to 7 years of ITR can be checked by the scrutiny committee before they provide tender approval.  
  • To claim a depreciation: Claim depreciation can be availed by owners of businesses in case the assets are their name or the name of the business. However, the amount that has been claimed can be used only for the purpose or the profession. This facility is available to individuals only if the ITR is filed on time.
  • Proof of income and address: The ITR can be submitted as an income or address proof.

What are the different types of Income Tax forms?

The various types of Income Tax forms are mentioned below:

  • ITR 1: The form is used by individuals who receive an income via pension or salary or from one residential property.
  • ITR 2: The form is used by individuals who are from the Hindu Undivided Families (HUFs) category and receive an income that is not from their profession and business.
  • ITR 3: The form is used by individuals who come under the HUFs and make an income from their business or profession.
  • ITR 4: The form is used by individuals who are proprietors or professionals and individuals who come under the HUFs category.
  • ITR 4S: This form is also known as SUGAM, and it is available for individuals who are a part of the HUFs category and for individuals who choose to go for the SUGAM taxation scheme under Section 44 AD/AE.
  • ITR 5: Local authorities, artificial judiciary persons, AOPs, BOIs, firms, and Limited Liability Partnerships (LLPs) can opt for this form.
  • ITR 6: Companies who do not claim for exemptions under Section 11 of the Income Tax Act must opt for this form.
  • ITR 7: In case individuals need to file returns under Section 139 (4A), Section 139 (4B), Section 139 (4C), Section 139 (4D), Section 139 (4E), and Section 139 (4F), they must opt for this form.  
  • ITR-V: This form is sent as an acknowledgment when e-filing of ITR is done. Individuals must send a signed copy of the form to the Income Tax Department in Bengaluru in case they do digitally sign their form online.

What are the Penalties in case ITR is not Filed?

The various penalties that are levied in case the ITR are not filed or wrong information is given are mentioned below:  

  • ITR not filed: In case ITR is not filed as per the details mentioned under Section 139 of the Income Tax Act, a penalty of Rs.5,000 or more is levied.
  • Wrong PAN or no PAN is provided: In case individuals provide the wrong Permanent Account Number (PAN), the penalty that is levied is Rs.10,000. In case the PAN details are not updated, instead of the regular 10% TDS deduction, 20% will be deducted.
  • Not checking Form 26AS: It is vital that individuals check Form 26AS multiple time before filing their returns. In case there is any mismatch in the details that are provided, it can lead to severe punishments.
  • Attempting to evade tax: Under Section 271(C) of the Income Tax, in case individuals provide wrong details of their income or conceal income tax, a 100% to 300% of the tax that has been evaded will be levied as a penalty. According to Section 271 AAB, depending on the scenario, the penalty that is being levied will vary. The different penalties that will be levied are mentioned below:
  • 10% of the income that has been undisclosed the previous year plus the interest will be the penalty that will be levied.
  • In case the individual does not mention the details of the undisclosed amount but discloses the details when filing ITR for the previous year, 20% of the undisclosed amount plus the interest will be levied as penalty.
  • A penalty of 30% to 90% of the undisclosed amount plus the interest is levied in case individuals do not disclose the previous year’s earnings.
  • Not paying the tax amount as per self-assessment: Taxpayers will be treated as defaulters in case they make a part payment or do not make the payment of the self-assessed amount, under Section 140 A (1) of the Income Tax Act. Under Section 221(1), the amount of penalty to be levied will be decided by the assessing officer. However, the assessing officer can exempt an individual from paying the penalty in case the individual provides an explanation as to why the payment was not made on time.
  • Not following up on a notice issued by the Income Tax Department: In case individuals fail to respond to any notices that have been issued by the Income Tax Department, then under Section 142(1) or Section 143(2), the assessing officer is allowed to send a notice requesting for the ITR to be filed or request for all the details of liabilities and assets to be provided in writing.  

News About Income Tax

  • Govt. allows IT dept and GSTN to share tax payer data

    The Income Tax Department of India has received approval from the government to share its tax payer data with the GSTN (Goods and Services Tax Network) in a bid to eliminate discrepancies in the information disclosed by business organisations. This will ensure additional scrutiny to businesses and make them share proper information with these organisations.

    If this move is implemented, direct and indirect tax authorities can easily cross check and verify the data shared by businesses. This will help them identify tax evaders and eliminate discrepancies. A formal system is expected to be implemented to facilitate data sharing between these authorities.

    If there are any mismatches in the information shared by businesses, these authorities can scrutinize their information and prevent tax evasion. This is considered to be a significant move that comes as a part of the government’s anti-evasion measures following the incorporation of the Goods and Services Tax.

    3 May 2019

  • Investors and directors in unlisted companies barred from filing ITR Sahaj and Sugam

    Directors as well as investors in unlisted companies have been barred from filing Income Tax Return (ITR) form Sahaj (ITR-1) and Sugam (ITR-4) by the Income Tax Department. This move has been taken to curb shell companies and control the spreading of black money. In the newly notified ITR forms for Assessment Year 2019-20 by the IT Department, the directors in both listed and unlisted companies will have to file their income tax returns in ITR-2 where they have to specify details such as name of the company, Directors Identification Number (DIN), equity holding, Permanent Account Number (PAN), etc. In a similar manner, even the investors in unlisted equity shares are required to provide details of such unlisted shares such as acquisition cost, date of purchase or sale, sale consideration at any time during the past year. Now, while Sahaj can only be filed by the resident individuals who have a total income of up to Rs.50 lakh from salaries, one house, other income sources, and agricultural income of up to Rs.5,000; Sugam can be filed by individuals, HUFs, and companies who have a total income of up to Rs.50 lakh under the presumptive income scheme from profession and business on condition that the assessee is not a director or an investor in an unlisted company.

    10 April 2019

  • New ITR forms for FY 2018-19 notified by CBDT

    Income tax return (ITR) forms for the last fiscal year 2018-19 has been notified by the Central Board of Direct Taxes (CBDT). The new forms include sections for more information about the tax payers. The new details that are required to be filled in the updated ITR forms include days or years of residency, unlisted shares holdings, and citing of PAN of the tenant in case of TDS filing. The new ITR-1 which is to be filed by resident individuals having total income of up to Rs.50 lakh from salary, a house property, and other sources like interest income, etc. have the option of Standard Deduction. A taxpayer can claim a maximum of Rs.40, 000 for FY 2018 -19 while filing his/her ITR. Moreover, individuals who have a house need to specify whether it is self-occupied, let-out or deemed to let-out. While previously taxpayers were only required to provide the income from other sources now they also have to give details of their income from other sources for the year. In ITR-2, individuals and HUFs who don't have income from profits and gains of business/profession need to provide details of their residency status along with specifying the number of days/years they were in India during the past year. Furthermore, individuals who are holding shares of an unlisted company are required to specify the company name, PAN, number of shares they hold/acquire, number of shares sold, etc. in the form.

    9 April 2019

  • Project Insight initiated by IT Department – new tax measures and GST structure come into effect

    The tax measures that were introduced in the interim Budget come into effect from April 1, 2019. These include tax rebates for income of up to Rs.5 lakh per year, capital gains for a second house as well as interest income, changes in notional rent, a higher standard deduction, etc. The real estate sector had a new GST structure imposed which would also come into effect from April 1, 2019. Project Insight has also been given the green light by the Income Tax Department who gave taxmen access to this tax tracker based on big data. Costing Rs.1000 crore to build, this tracker will help taxmen identify discrepancies between spending and income tax declarations by tracking activities of taxpayers on social networking sites.

    2 April 2019

  • Tax department to monitor social networking sites to track black money

    Project Insight, a Rs.1000-crore big data analytics project, will be used by the Income Tax Department to monitor social networking sites to identify people who may be evading taxes or manipulating tax figures to lessen their tax liabilities. This new project was launched on April 1, 2019. It works by tracking social media activities such as photographs and videos which gives a picture of a person’s expenditure patterns. If the declared income does not match the lifestyle that’s shown on social media, the IT officials will take note and follow up with appropriate action. Tax officials were given access to the software on March 15, 2019. A master file with key information about both corporates and individuals can be prepared with the help of Project Insight. New tax filers can also be monitored through this. The aim of the project is to encourage people to file their returns and pay taxes on time. With the integrated information management system and machine learning, the collection of documents and webpages will support the IT department to drastically cut down tax evasions in the country as it would also scrutinise tax returns based on specific criteria.

    2 April 2019

  • IT Department of India Offered Relief to 120 Startups From Angel Tax Net

    As per the announcement made by the Income Tax (IT) Department of India, 120 startups in India have been exempted from the tax levied on funds received from angel investors. The IT department recently intimated the startups regarding this new development under a scheme that was introduced in February 2019. The move was made to alleviate the tax problems faced by the new-age firms in the country, which were wrongly caught in an anti-evasion provision of the Income Tax Act, 1961.

    The intimation from the Central Board of Direct Taxes (CBDT) regarding the angel tax exemption for startups can prove to be helpful for companies which have already received tax notices for share premiums higher than their fair value. The startups will be able to submit the exemption certificates from the tax department at the stage of appeals to a higher authority within the tax department after all the assessments are done and the final tax demands have been issued. Approximately 150 companies applied for the tax benefits available for startups in the month of March 2019. However, only 120 firms have been considered eligible for this tax relief till now. According to the statements of an official, the rest of the applicant firms are expected to get the tag of a ‘startup’ once the errors in their applications are rectified.

    25 March 2019

  • What to do if you have received income tax scrutiny notice

    A scrutiny notice is sent to taxpayers by the Income Tax Department for verification of the income tax returns filed every year. This is sent with the aim of ensuring that the income is not understated nor has any excessive losses been computed or underpaid taxes. Scrutiny notices can be complete scrutiny or limited scrutiny. For complete scrutiny, the taxpayer can be asked to furnish a comprehensive list of documents which are required for a detailed audit of tax returns. For limited scrutiny notices, only details that are relevant to the query or transaction have to be submitted by the taxpayer. Cases for scrutiny are selected following a set of predetermined criteria. They are also selected using Computer Aided Scrutiny Selection (CASS). Income tax returns are selected for scrutiny within 6 months of the end of the financial year of the returns being filed. The notice has to be reviewed to ensure that it is within the prescribed timeframe and if not, the income tax office has to be informed. Details have to be verified as well such as the Permanent Account Number (PAN), name, financial year, the tax officer’s jurisdiction details. Documents have to be reviewed before being submitted. These should be submitted to the tax officer or uploaded online by the date assigned. If a personal appearance is requested, it has to be done by the taxpayer or an authorised representative failing which a penalty will be incurred.

    13 March 2019

  • Income Tax Department looking to vacate stay orders by tribunals

    The Income Tax Department (ITD) is stepping in in order to lift some of the stay orders that were obtained by some taxpayers from the appellate tribunals. A recent ruling of the Supreme Court has led the ITD to take this decision. In this ruling, the Supreme Court has ruled out that stay orders will not be extended for a period of more than 6 months whether it is a criminal case or a civil case. However, there will be certain exceptions.

    This has led the ITD to focus on the cases where the I-T Appellate Tribunal (ITAT) has extended the stay orders for more than 6 months. The decision is mainly aimed for shoring up the revenue before 31 March. If the stay is vacated within the next few weeks, the taxpayers will be coming under compulsion to pay up before the closing of the fiscal year.

    11 March 2019

  • Government willing to articulate tax rules to tax the MNCs

    The Indian government is planning to articulate rules to tax the multinational companies in India based on their volume of transactions and the number of customers that they have in India. However, the point of confusion in this matter was whether a company which is headquartered in India but collects a commission on a global deal should be domestically taxed with the commission amount or the value of the total deal. According to a ruling from a tax tribunal in the case of Fox International, which is a part of Star TV, multinational companies having a significant economic presence in India can be domestically taxed only the “attributable profits” of a multinational. The tax tribunal also stated that only the company's commissions will be taxed domestically and not their entire income. The focus of the ruling was on territorial interconnection for profit attribution and their taxation to Indian international companies with Indian business connection.

    4 March 2019

  • Startups facing Angel Tax woes might get relief

    The recent relaxation norms on Angel tax hasn't yet been applied to the startups who have already received notices from the Income Tax Department. However, startups who received notices regarding their valuation and source of funding might get relaxation. The Central Board of Direct Taxes (CBDT) plans to circulate a notification asking tax officers to accept valuation certificates submitted by the startups.

    Startups who received angel tax notices were challenged based on their valuation in funding rounds. Hike in valuations was questioned by tax officers even when the revenue was dipping down. Almost 2000 startups received notice as the revenue department considers capital in excess of the market value as 'other capital'. Such capitals are taxable at 30%. Numerous startups also received notices regarding unexplained credit.

    The CBDT plans to write to the principal commissioners advising them to seek clarification from the investors rather than startups in cases where the funding appears suspicious. For cases pertaining to valuation, the explanation provided by startups must be given weightage.

    1 March 2019

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