INCOME TAX – FREQUENTLY ASKED QUESTIONS

INCOME TAX – QUESTIONS AND ANSWERS :-



What is an Assessment Year?





It is the twelve-month period 1st April to 31st March immediately following the previous year [refer answer-4]. In the Assessment year a person files his return for the income earned in the previous year. For example for FY:2006-07 the AY is 2007-08.





What does the Income Tax Department consider as income?

The word Income has a very broad and inclusive meaning. In case of a salaried person, all that is received from an employer in cash, kind or as a facility is considered as income. For a businessman, his net profits will constitute income. Income may also flow from investments in the form of Interest, Dividend, and Commission etc. Infect the Income Tax Act does not differentiate between legal and illegal income for purpose of taxation. Under the Act, all incomes earned by persons are classified into 5 different heads, such as:

Income from Salary



Income from House property



Income from Business or Profession



Income from capital gains



Income from other sources

My children living abroad send me Rs.20000/- per month for my maintenance. Would this be considered as my income?

No.

What is a return of income?

It is a prescribed form through which the particulars of income earned by a person in a financial year and taxes paid on such income is communicated to the Income tax department after the end of the Financial year. Different forms are prescribed for filing of returns for different Status and Nature of income.

From where can I get a return form?

The Public Relation Officer [PRO] can be contacted for this purpose. The form can also be downloaded from the site http://www.incometaxindia.gov.in/.

How can I know which form is applicable for my income?

You should choose a return form according to your status and nature of income from the following:

ITR1 – For Individuals having Income from Salary/ Pension/ family pension & Interest

ITR2 – For Individuals and HUFs not having Income from Business or Profession

ITR3 – For Individuals/HUFs being partners in firms and not carrying out business or profession under any proprietorship

ITR4 – For individuals & HUFs having income from a proprietary business or profession

ITR5 – For firms, AOPs and BOIs

ITR6 – For Companies other than companies claiming exemption under section 11





ITR7 – For persons including companies required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D)

ITR8 – Return for Fringe Benefits

ITRV – Where the data of the Return of Income/Fringe Benefits in Form ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6 & ITR-8 transmitted electronically without digital signature

If I fail to furnish my return within the due date of filing, will I be fined or penalized?

Yes. This may take the form of interest if the return is not filed before the end of the assessment year. If the return is not filed even after the end of the assessment year, penalty may also be levied.

If I have paid excess tax how and when will it be refunded?

The excess tax can be claimed as refund by filing your income tax return. It will be refunded by issue of cheque or by crediting to your bank account. The department has been making efforts to settle refund claims within four months from the month of filing return.



There are various deductions that have not been reflected in the Form 16 issued by my employer. Can I claim them in my return



Yes.



What is considered as Salary income?



Whatever is received by an employee from an employer in cash, kind or as a facility [perquisite] is considered as Salary.



What are allowances? Are all allowances taxable?



Allowances are fixed amounts, apart from salary, which are paid by an employer for the purpose of meeting some particular requirements of the employee. There are generally three types of allowances for the purpose of income tax- taxable, fully exempted and partially exempted.



My employer reimburses all my expenses on grocery and children’s education. Would this be considered as income?



Yes. These are in the nature of perquisite.



Even if no taxes have been deducted from salary, is there any need for my employer to issue Form-16 to me?



Form-16 is a certificate of TDS and in your case it will not apply. However your employer must issue a salary statement.



If I am receiving my pension through a bank who will issue Form-16 or pension statement to me- the bank or my former employer?



The bank.



Are retirement benefits such as PF and Gratuity taxable?



No. They are exempt subject to conditions and limits laid down in the Income Tax Act.



Can my employer consider relief u/s 89(1) for the purposes of calculating my tax liability?



Yes.



Is leave encashment taxable as salary?



It is taxable if received while in service. Received as retirement benefit, however it is exempt subject to certain conditions.



What is TDS?



TDS means Tax Deducted at Source. It is the amount withheld from payments of various kinds such as salary, contract payment, commission etc. This withheld amount can be adjusted against your tax due.



Some demand has been raised by my Assessing officer after assessment. Can I pay this demand in installments or seek time till my appeal is settled?



Yes. You may approach your Assessing officer within 30 days of receipt of demand notice for installments or stay or seek time for payment. However you are liable to pay interest for delay in payment of demanded tax.





Source: Income Tax Department Website