New Indian ITR-5 Income tax Form with Indian currency and PAN or Permanent Account Number on isolated background. | Photo Credit: lakshmiprasad S
Measure aimed at getting more people to file returns, bringing in more transparency
Individuals paying Rs. 25,000 as tax deducted at source (TDS) or tax collected at source (TCS) or having total deposits in saving bank accounts of Rs. 50 lakh or more will now be required to file income tax returns (ITR) even if their gross income is less than or equal to exempted income.
These are two among the four new criteria added by the I-T Department to the rules for filing ITR. Through a notification dated April 21, a new rule (12AB) was added to the Income Tax Rules, 1962.
What the new rule says
“If his total sales, turnover or gross receipts in the business exceeds Rs. 60 lakh during the previous year, or if his total gross receipts in profession exceeds Rs. 10 lakh, or if the aggregate of TDS and TCS is Rs. 25,000 or more, or if the person’s deposit in one or more savings bank accounts is Rs. 50lakh or more during the previous year, the individual has to file returns,” the new rule states.
There are already similar conditions. According to Aakanksha Goel, Direct Tax Partner with TR Chadha & Co, the Finance Act, 2019, added a seventh proviso to Section 139 that required the filing of I-T returns if certain criteria were met, such as Rs. 1 crore or more deposited in the current account, expenditure exceeding Rs. 2 lakh for foreign travel or an amount exceeding Rs. 1 lakh for electricity consumption during the year. Four norms have now been added.
“Such norms will capture all assessees incurring high value transactions but not filing returns because their taxable income is less than the basic exemption limit. The number of returns filed in the country can be expected to rise, and we can expect greater transparency in the system,” she said.
Relief for senior citizens
Sujit Bangar, Founder, Taxbuddy.com, believes that these are very stringent measures, requiring many taxpayers even with income less than prescribed limit to file ITRs.
According to Shashi Mathews, Partner with IndusLaw, the apparent objective of the exercise is to reduce tax non-compliance and tax evasion, and to bring a large section of adult population within the tax ambit, as most people in India do not file returns.
“This mandate applies to all individuals other than companies or firms, regardless of whether their total income exceeds the taxable threshold. As a measure of relief for senior citizens, the TDS and TCS threshold limit is prescribed as Rs. 50,000 instead of Rs. 25,000,” Mathews said.
The new norms take effect at a time when the debate over the low number of tax payers is gathering momentum. Finance Minister Nirmala Sitharaman recently informed the Rajya Sabha that the total number of taxpayers for AY21 (FY20) was about 8.22 crore in a population of over 136 crore. Taxpayers include persons who pay income tax and corporate tax and have either filed a return of income for the relevant AY or in whose case tax has been deducted at source in the relevant FY, but the taxpayer has not filed returns.