July 31, 2018 is the last day to file income returns. While Income tax return form (‘ITR’) 1 is the most compressed and an easy-to-fill-in return form, this form can only be filed by ordinarily resident individuals having income from salary/ pension, income or loss from one house property (excluding brought forward and carried forward losses) and income from other sources (other than winnings from lottery and race horses or los under this head).

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Further, to file form ITR - 1, the total income of the individual must be less than or equal to Rs 50 lakh and agricultural income if any should not exceed Rs 5,000. Likewise, if such an individual has income from foreign sources or foreign assets or signing authority in any account outside India, this form shall not be applicable in his case.

Form ITR - 1 is broken up into five parts:

Part A – General Information

This part captures basic details such as name, address, mobile number, email address, aadhaar number (or enrolment id), filing status, employer category, section under which return is filed, etc.

Part B – Gross total Income

This section computes gross total income of the individual under the head ‘salaries’, ‘income from house property’ and ‘income from other sources’.

Part C – Deductions and taxable total income (‘GTI’)

This field of form ITR – 1 reflects deductions claimed by the individual from his GTI, under chapter VIA of Income-tax Act, 1961 (‘Act’) which help him arrive at the Total income (‘TI’) (i.e. income on which tax is to be computed).

Part D – Computation of tax payable

This part is a tax summary page, listing down items like tax computed on the TI plus interest u/s 234A, 234B and 234C and fee u/s 234F. Further, after reducing various tax credits, net taxability (i.e. tax payable or refundable) is computed under this section. In addition to the details of taxes, this section of form ITR - 1 also contains reporting of exempt income.

Part E – Other information

This section of the return form contains reporting of all bank accounts excluding dormant accounts. The bank details required are as follows: name of the bank, account number, IFS code (mandatory if person is claiming refund). Additionally, this space provides for party-wise details of TDS, advance tax and self-assessment tax (summary of which is captured in part D of the form) and party-wise details of deductions u/s 80G, which is followed by verification page.

How to file?

Once the tax payer is registered on the e-filing website of income-tax, after logging in on the said portal, Form ITR 1 can be e-filed in any of the following two ways:

Prepare and submit online

This function which is a more convenient option, is available only for filing form ITR – 1 and form ITR -4. Under this option, a return form which is pre-filled on the basis of return filed last year opens up. Once the said details alongwith current year’s income and tax details are filled-in, the same can be submitted with a click of a button. Once submitted, the e-filed form can be verified either electronically (by generating an electronic verification code) or manually by sending a signed acknowledgment of return filing to Central Processing Centre, Bengaluru.

Upload xml

Under this option, the return form needs to be prepared either in a separate excel utility or java utility. Once filled-in, an xml file has to be generated from the said return preparation utility and thereafter it needs to be e-filed and e-verified.

Manner of filing Form ITR-2

Form ITR - 2 can be submitted using the option ‘upload xml’ as mentioned in point 3 above.

Do not make false claims in ITR

The recent news read that the income tax department caught out a case of fraudulent tax refunds claimed by employees of well-known companies. Reportedly, returns of these employees cited inflated or false claims of loss under the head income from house property.

Likewise, over 18,000 revised returns were filed in Mumbai and Bengaluru majorly by Government and PSU officials, claiming false refunds. The said revised returns were filed with false, inflated claims once the original returns were processed.

Utmost care needs to be taken while filing return of income as the Act provides for levy of penalty in case of under-reporting and misreporting of income.

Penalty shall be 50 percent of tax payable of under reported income in case assessed income exceeds the returned income. However, in case of misrepresentation or suppression of facts, claim of expenditure which is not substantiated by evidence, failure to record any receipt in the books of accounts, having bearing on total income, etc., penalty shall be 200 percent of tax payable on under reported income.

Penalty for late filing of ITR

Late filing of income tax returns can attract the following consequences:

Rs 5,000 if return filed after due date but before 31 December or Rs 10,000 if return filed after 31 December. If total income does not exceed Rs 5,00,000, then penalty shall not exceed Rs 1,000.

Interest to be paid on tax amount;

Denial of carry forward of losses of the current year; and

Denial of certain deductions under Chapter VI-A.

Fraudulent tax refunds:

A case of mala fide tax refunds can arise in claiming refund of taxes deducted by the employer by showing incorrect/false allowances in the return of income. To curb the same, the tax department has started reconciling the salaried income as per form 16 and return of income in the intimation processed u/s 143(1) of the Act.

The above fraudulent claims for refunds can attract penal provisions of the Act.

Who can use ITR 1 Sahaj?

Please refer our comments to question 1 above.

Who can use ITR 2?

This return form can be filed by individuals and Hindu undivided family (‘HUF’) not having income from profits and gains of business or profession. In other words individuals who cannot file ITR 1 and HUFs can file ITR form 2 provided they do not have income from business or profession.

ITR 3 & 4 – Applicability

ITR form 3 is applicable in case of individuals and HUFs having primary source of income from business or profession, while ITR 4 is applicable in case where person opts for presumptive taxation scheme u/s. 44AD, 44ADA or 44AE.

Gopal Bohra is partner, N.A Shah Associates LLP.