The Hindu Business Line : How to make Forms less taxing

With the deadline for filing income-tax returns fast approaching, are you wondering which of the plethora of forms to fill in? We take a look at which form is appropriate for you, given the nature of your income, and how different these new forms are from the old ones.

New income-tax return forms are applicable from the current assessment year (2007-2008). Until this year, non-corporate assessees, including the salaried class, could file their returns using Form 2D (Saral) and Form 2E (Naya Saral). Under the new regime, eight new forms (ITR 1 to ITR 8) have replaced all the existing ones; ITR 1 to ITR 4 alone are applicable to non-corporate assessees.

Who files what

ITR 1, the simplest of all, is for individuals with income from salary, pension/family pension and interest income. Although two versions of ITR 1 are available, content-wise they are identical, the only difference being that the second version is more spacious than the first.

ITR 2 is for individuals and Hindu undivided families (HUFs), with non-business income (such as income from house property and capital gains) in addition to the sources mentioned in ITR 1.

Thus an assessee who pays interest on a housing loan or has dividend income along with salary cannot use ITR 1. ITR 3 is for individuals and HUFs earning income as a partner in a firm while ITR 4 is for those who carry on any proprietory business or profession.

Annexure-free returns

The Saral was a simple one-page form to which relevant documents needed to be attached. The new returns have been made annexure-free but have built-in schedules for each head of income.

Thus ITR 4 wants all items in the Profit and Loss account and the Balance-Sheet disclosed in the format, under the specified heads.

Similarly, details relating to Form 16, Form 16A (tax deducted at source from salary and income) and payment of advance tax and self-assessment tax also need to be given in the return itself.

While on the one hand the returns have been made annexure-free, on the other, they do call for a few attachments.

For example, under the schedule relating to House Property, if one owns more than two properties, one has to fill in details relating to the remaining properties on a separate sheet.

Ditto, for a partner deriving income from more than five firms. Even in the case of TDS schedules, space has been provided only for two entries. If the entries exceed the space provided, a separate attachment in the same format is called for.

Disclosure of high-value transactions

Form 2F (introduced last year, but withdrawn) required a cash flow statement. In place of this, a schedule (called AIR) requiring disclosure of eight different types of high-value transactions has been inducted.

For example, if a single payment of Rs 2 lakh or more has been made for acquiring units of a mutual fund, this has to be disclosed. This information can be matched with the Annual Information Returns being filed with the tax authorities by banks, credit-card companies, registrars and other organisations to check if the assessee’s expenditure is in excess of his declared sources of income.

Filing of returns

The returns can be filed in a paper form or bar-coded paper form or electronically, with a digital signature. If the return is transmitted electronically but without a digital signature, two copies of the form must be submitted along with the return.

One will be returned to the assessee as an acknowledgement after affixing the stamp and seal.

In other cases, the acknowledgement slip is attached with the form. The return need not be filed in duplicate.

Tax return preparers

If you find it difficult to fill in the return yourself, you can take the help of recognised Tax Return Preparers.

If the return has been prepared by such a preparer, it has to be disclosed in the return in the space provided and counter-signed by the preparer. The TRP is entitled to a maximum fee of Rs 250 from the taxpayer.

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