To encourage more individuals to file returns and widen the tax net, the government is set to introduce a single-page income tax (I-T) return form from April 1.
This will be for those with annual salaried income up to Rs 50 lakh, much higher than Rs 5-lakh limit proposed in the Union Budget, told by Revenue Secretary Hasmukh Adhia.
He added this would only be for those with salaried and one house rent income.
There are 290 million PAN card holders (the I-T dept identification) but only 60 mn return filers.
Currently, the I-T form is three pages. It was simplified two years ago, when a controversial provision for mandatory disclosure of foreign trips and dormant bank accounts was removed.
“To expand the tax net, I also plan to have a simple one-page form to be filed as I-T Return for the category of individuals having taxable income up to Rs 5 lakh, other than business income,” Finance Minister Arun Jaitley had announced in the 2017-18 Budget.
Of the 7.6 million individual assessees who declare annual income above Rs 5 lakh, 5.6 mn are in the salaried class.
For those with annual income of over Rs 50 lakh and up to Rs 1 crore, a surcharge of 10 per cent will be imposed; 15 per cent for those over Rs 1 crore. The surcharge is estimated to generate additional revenue of Rs 2,500 crore.
Many salaried people do not file returns as it is cumbersome. And, their I-T dues are already taken through Tax Deduction at Source (TDS), which is 37 per cent of gross direct tax collection. Its contribution during 2015-16 was Rs 3.25 lakh crore, growth of 11.6 per cent over the previous financial year.
TDS payers might have a tax liability on account of income from other sources, which quite a few avoid paying.
Those who do not file their I-T returns (ITRs) on time will have to pay a penalty of up to Rs 10,000 from the 2018-19 assessment year (AY). It will be Rs 5,000 if the return is furnished after the due date but on or before December 31 of the AY. However, for payers with total income not exceeding Rs 5 lakh, the fee for late return filing will be Rs 1,000.
An individual whose income exceeds Rs 2.5 lakh in 2016-17 is required to file an ITR. The number of non-filers with potential tax liabilities has risen from an estimated 2.21 million in 2014 to 5.89 million in 2015. Non-filers in 2013 were 1.22 million.
The direct tax collection target for 2016-17 is Rs 8.47 lakh crore, about 14.1 per cent more than a year before.
“Increasing the coverage with a simplified ITR is a good move. It will ensure many of the salaried who do not file a return feel encouraged to do so. A lot of details are already there in the system, doing away with the need to fill the details yourself. With more information with the government, in future there might not even be a need to file a return,” said Neeru Ahuja of consultancy Deloitte.
A person with annual income up to Rs 5 lakh and filing return for the first time would not be subjected to any scrutiny in the first year, unless there is specific information with the department regarding high-value transactions.