Income Tax Returns: CBDT has simplified process, but it could be demanding exercise for naive tax avoiders

Income tax return filing normally is a simple affair especially for the salaried class with no other income. Just keep form 16 in front of you, and the return can be filed in a jiffy, online. Form 1 is just that---online. There is no need to download the form, fill it offline and then upload it. In fact, a salaried person with no other income need not bother to file the return if he has already filed his return to his employer who in turn can file a bulk return of all his employees in a computer-readable format. But then this facility exists only on paper, with employers fighting shy of shouldering additional responsibilities other than deducting tax from salary which they have to do willy-nilly.

But it can be complicated if one has made his financial affairs complicated. Normally husband and wife file their separate returns. But if a husband has invested his money in the name of his wife and vice-versa, then the one who has supplied money has to bear the brunt. In other words, the husband in the above example has to include the income from such investment in his return and pay tax accordingly. Likewise, if you have minor children, all their income except their own labour is included in your income or your spouse’s income depending upon who has greater earnings.

An exception has been carved out in favor of physically or mentally handicapped minor children. And lastly, if you have invested in the name of your daughter-in-law, the income from such investment bounces back to you, as it were. All these are known as clubbing provisions to prevent splitting of income to reduce or avoid tax. Remember if the income is split between two persons, there is a lesser overall tax bill for the family. Naturally, this impelled former prime minister Indira Gandhi to toy with the idea of asking couples to file joint returns on the ground that those who are united in the heavens should not be separated on earth. However, she dropped the idea so much so that clubbing is attracted only when there is a deliberate attempt at tax avoidance like investing in the name of one’s wife. The point to remember for an individual is to see if clubbing provisions are attracted in his/her case and file return accordingly.

 Income Tax Returns: CBDT has simplified process, but it could be demanding exercise for naive tax avoiders

Representational image. PTI.

A wife who has no income apart from the income from money supplied by her husband is in fact not required to file her return. Her husband is responsible in such circumstances for including her income in his own return and pay tax accordingly. Failure to club income as aforesaid would result in both getting charged of interest and penalty.

Don’t forget to declare your foreign income if you have got any assets abroad in which you have a beneficial interest.

Don’t hesitate to file a revised return if you have committed an inadvertent error in your original return. A revised return can be filed anytime after filing the original return on time but before the assessing officer completes his assessment or within the assessment year whichever is earlier. So much so, if you soon after filing the return remember to your chagrin that an error has crept in, do not lose sleep over it or live with a guilty conscience or wait for the notice from the department. You can proactively and immediately, on the heels of filing the original return, file a revised return for which there is a provision in the income tax department’s e-filing website itself.

The Central Board of Direct Taxation (CBDT) must be lauded for making life a lot easier for taxpayers when it comes to filing returns. If your Aadhaar is on all fours with your PAN and it is linked with it, the e-return is verified online, rendering taking printout for posting the same to the department redundant.

(The author is a senior columnist and tweets @smurlidharan)

Updated Date: Jul 23, 2018 09:08:19 IST