What are TDS provisions, exemption thresholds and claim of credit?

TDS helps make sure the government knows the details of the recipient such as his PAN, and total income earned.

Business Standard : Tax Deducted at Source (TDS) was introduced by the government to crack down on the tax evaders. TDS is basically collecting tax at source. TDS can also be considered a prepayment of tax. As per the TDS concept, if the payment exceeds a defined threshold, then a company or a person making the payment (deductor) must deduct tax while making a payment. The deductor must then deposit the tax deducted into the account of the central government on behalf of the recipient of income. TDS is applicable at various rates as specified by the Income Tax Department. The person from whose payment tax is being deducted (deductee) is issued a TDS certificate by the deductor.

TDS Provisions

The person receiving income (like salaried individuals) faces TDS in the form of a tax deducted salary paid to them. TDS laws have given the authority to the payee or employer, to deduct tax prior to making the full payment to the employee.

TDS helps make sure the government knows the details of the recipient such as his PAN, and total income earned. Any TDS deduction also gets mapped to Form 26AS.

TDS Exemption Threshold

Tax has to be deducted by the deductor at the rates (specified below) if the amount payable is more than the threshold limit as given in the following table, the below rates are applicable for FY 2018-19:

There have been changes to the threshold in some the aforementioned section applicable from the FY 2019-20 onwards. For instance,

1. Under section 194A, the threshold of interest earned on bank/post office deposits has been raised from Rs 10,000 to Rs 40,000.

2. Tax deduction limit on rent under section 194I has also been increased from Rs 1,80,000 to Rs 2,40,000.

Claiming TDS Credit

A TDS deductor must issue TDS certificates to the deductee. This includes banks and employers. For instance, employers issue Form 16 to their employees annually, whereas a bank provides Form 16A quarterly to the deductees whose tax was deducted at source.

The TDS certificate states how much tax was deducted as TDS along with the income received from the employer/ deductor. You can view and download your Form 26AS by logging into TRACES through your PAN.

Filing out a tax return for the first time? Here are seven important tips

Individuals (residents and non-residents) need not pay taxes on income up to Rs 2.5 lakh. Beyond this limit, their income becomes taxable based on slab rates prescribed under the law.

There are many who find income tax calculation and filing to be a tough task. However, reading and learning about it can turn out to be a skill useful for a lifetime. Knowing this basic skill gives you the confidence to deal with your income and taxes. Here are a few important tips that are useful when filing income taxes, especially for first-time taxpayers.

Tips for first-time taxpayers

Tax payment period and related terms

Tax is calculated based on the income earned during the period from April 1 of the current year to March 31 of the following year. This period is called the financial year (FY) and the year in which the income is assessed is called the assessment year (AY).

For example, the income accrued during the financial year 2018-19 is assessed in the assessment year 2019-20.

Income tax slabs

Taxpayers must determine the income tax slab they fall under to determine their tax liability for a given financial year. The income tax slabs are designed based on the income range per annum.

Each category of income per annum will correspond to a certain percentage of tax. Additionally, a certain percentage of cess will also be applicable.

Individuals (residents and non-residents) need not pay taxes on income up to Rs 2.5 lakh. Beyond this limit, their income becomes taxable based on slab rates prescribed under the law. The basic exemption limit is increased to Rs 3 lakh for a senior citizen and to Rs 5 lakh for a super senior citizen.

Form 16

Form 16 is a TDS certificate provided by an employer for salaried individuals. This form includes all the salary details to be entered while filing income tax returns. The latest Form 16 is designed such that it can be directly used to report all the information to be entered in new ITR-1 form. It consists of information on the deductions you have claimed, the salary earned, and exemptions availed.

The employer should provide Form 16 by 15 June every year. Though, the due date for providing Form 16 has been extended to 10 July 2019.

Business Standard

A step-by-step guide to filling salary details in your income tax return

ITR-1 can be used to report income from salary, one house property, income from other sources, and agricultural income of up to Rs.5,000.

Business Standard : Salaried individuals can file income tax returns (ITR) using the forms ITR-1 or ITR-2. ITR-1 applies to individual resident taxpayers with a total income of up to Rs 50 lakhs. Whereas, ITR-2 applies to other individual taxpayers who do not have income from business or profession.

ITR-1 can be used to report income from salary, one house property, income from other sources, and agricultural income of up to Rs.5,000. The form ITR-2 can be filed by individuals having income from more than one house property, capital gains, holding directorship in any company, or unlisted equity shares.

The salary TDS certificate in Form 16 has been revised to provide for more detailed information on the various tax-exempt allowances and deductions provided under the income tax law. Part B of Form 16 has been revised to provide for details of the various exemptions and deductions allowed under the income tax law.

Filling up your ITR:

ITR-1

Taxpayers would have to fill in aggregate values of the broad components of salary:

Salary

Perquisites

Profits in place of salary

Furthermore, a complete break-up would need to be provided of all allowances exempt under section 10. For example:

House rent allowance

Leave travel allowance

Gratuity

Similarly, each of the deductions allowed under chapter VI-A from section 80C to 80U must be reported separately. For example:

Life insurance premium, tuition fees for children, and PPF investment under section 80C

Medical insurance premium under section 80D

Donations under section 80D

Here's all you need to know about ITR 1, 2 and 3 for FY 2018-19

A taxpayer who is an individual and is resident in India and earning income up to Rs 50 Lakh can use ITR-1 to file the return.

The income tax return forms have been notified for the tax filings due for AY 2019-20. The due date for filing the income tax returns for FY 2018-19 is 31 July 2019. The returns require some additional and detailed disclosures in comparison to the income tax returns of earlier years.

Taxpayers need to be aware of the key changes that would impact their tax filings.

Keep Reading : Business Standard

Form ITR-1:

A taxpayer who is an individual and is resident in India and earning income up to Rs 50 Lakh can use ITR-1 to file the return. The form ITR-1 can be filed for reporting income from salary, one house property, income from other sources and agricultural income up to Rs 5,000.

Taxpayers have to report the gross salary under income from salary i.e., salary, perquisites and profits in lieu of salary. The exempt allowances have to be disclosed allowance-wise and deducted from gross salary e.g., if a portion of the HRA has been claimed as exempt, it’s amount should be separately reported. For income earned from other sources, a taxpayer has to also provide detailed break-up of incomes e.g, Interest income from savings or fixed deposits etc.

Form ITR-2:

ITR-2 can be used by taxpayers who are individuals and Hindu Undivided Families (HUFs) to report all types of income other than income from business or profession.

Resident individuals who have total income above Rs 50 Lakh have to use ITR-2. Also, a taxpayer who is a non-resident or a Director in any company or has invested in unlisted equities at any time during the financial year has to file the returns in ITR-2 even if their income is less than Rs 50 Lakh. Such taxpayers have to disclose information on their Directorships in various companies and details of their investment in unlisted equity shares.

In ITR-2, in reporting the income from salary, taxpayers need to provide a complete break-up of the details of various components of salary. The specifications of the amounts falling under salary, perquisites and profits in lieu of salary have to be mentioned therein. Taxpayers would be able to draw this information from the annexure to Form 16 provided by the employer.

Also, an employee earning income from more than one employer during a financial year has to provide the complete salary details (as above) for each employer.

In making the disclosure under ‘residential status’, taxpayer has to furnish the details of days of stay in India in the previous year, during the preceding four years etc.

88 lakh taxpayers didn't file returns in demonetisation year: Report

There are several reasons that could have led to the spike in stop filers. The two main reasons could be - job loss and drop in income.

Income-tax returns (ITRs) have seen a surge post demonetisation and GST introduction, and the government claims these numbers suggest a surge in tax compliance in the country. However, according to Indian Express as many as 8.80 million taxpayers turned out to be 'stop filers' - those who did not file tax returns in a given year despite doing so in previous years- in the financial year 2016-17 - the year Prime Minister Narendra Modi demonetised high-value currency notes.

(Business Standard)

Records accessed by The Indian Express reveal a massive spike in the number of “stop filers” in the same year, reversing a four-year trend. In 2016-17, the number of stop filers jumped 10-fold to 8.80 million from 856,000 in 2015-16, the highest increase since 2000-2001.

Who are 'stop filers'?

Stop filers are individuals who filed returns previously but didn't do so in the current year. They do not include taxpayers who have passed away or whose PAN cards have been cancelled or surrendered.

Here's what the latest report on 'stop filers' reveals

In 2013 the number of stop filers was 3.75 million. Since then there was a continuous slide in the number of stop filers. It slipped to 2.70 million in 2014, 1.63 in fiscal 2015 and 856,000 in fiscal 2016.

Records show that the trends reversed in 2017-2018. The number of stop filers jumped to 8.80 million, highest in almost a decade.

Reasons behind the spike in stop filers in 2017-2018

There are several reasons that could have led to the spike in stop filers. The two main reasons could be

— job loss

— drop in income

The Indian Express quoted officials as saying that the number may have increased because of a fall in economic activity. “Typically, the number of stop filers reflects a compliance and enforcement gap, which the tax administration fails to enforce,” said an official. “But this huge increase in stop filers for 2016-’17 cannot be attributed to sudden changes in compliance behaviour. The spike could be due to a fall in income or loss of jobs during the year.”