TAX MANAGEMENT

Mandatory submission of return of income:

• Persons Conditions
o Company and Firm [Sec. 139(1)] Any amount of income or loss
o Resident having asset or signing authority in
any account located outside India [Sec. 139(1)] Any amount of income or loss
o Every other person [Sec. 139(1)] Gross total income > Tax exemption limit
o Charitable/Religious institutions (Trust) [Sec. 139(4A)] Total income* > Tax exemption limit
(*without exemption u/s 11 & 12)
o Political Parties [Sec. 139(4B)] Total income* > Tax exemption limit
(*without exemption u/s 13A)
o Scientific research association, news agency etc Total income* > Tax exemption limit
[Sec. 139(4C)] (*without provisions of Sec. 10)
o College, universities and other institutions
related to scientific research [Sec. 139(4D)] Any amount of income or loss
o Business trust [Sec. 139(4E)] Any amount of income or loss
o Investment fund [Sec. 139(4F)] Any amount of income or loss
• Non-resident Indian need not file return of income u/s 115-G, if –
- his total income consists only of investment income and/or long-term capital gains, and
- TDS has been made from such income.

Voluntary submission of return of income:

• Person who wants to claim relief u/s 90 or 90A or 91.
• Person against whom TDS is deposited.
• Person who pays advance tax.
• Person who wants to avail the benefit of carry forward and set off of loss.
• Person who wants to file return of income.

Due date of filing return of income:

o Company 30th September of A.Y.
o Company which requires to furnish report u/s 92E** 30th November of A.Y.
o Person other than company, but requires Tax Audit 30th September of A.Y.
o Person other than company, but does not require Tax Audit 31st July of A.Y.
** Report u/s 92E is required for international transactions.

Relevant forms of return:

Assessee Form No.
o Individuals – ITR-1
- Resident and ordinarily resident (SAHAJ)
- Income from salary, house property and
other sources (except lottery and horse race) only
- Total income ≤ Rs. 50 lakh
- Agricultural income ≤ Rs. 5,000
- Dividend income** from domestic companies ≤ Rs. 10 lakh
- No claim of relief u/s 90, 90A or 91
- No asset and/or signing authority in any account located outside India
- No income from any sources outside India
- No unexplained income
**excludes income from mutual fund
o Individuals (other than above) and HUF having no income from business or profession ITR-2
o Individuals and HUF having income from business or profession ITR-3
o Individuals, HUF and Firm (except LLP) having income from business or profession, but
such income being computed u/s 44AD or 44ADA ITR-4
o Firms, LLP, AOP, BOI ITR-5
o Companies claiming no exemption u/s 11 ITR-6
o Persons (including companies) u/s 139(4A), 139(4B), 139(4C) or 139(4D) ITR-7
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• Section 44AD (Presumptive taxation on business income) : If turnover ≤ Rs. 2 crores
Presumptive income = 6% of digitally (including a/c payee cheques & DD) received turnover
+ 8% of remaining turnover
• Section 44ADA (Presumptive taxation on professional income): If gross receipts ≤ Rs. 50 lakh
Presumptive income = 50% of gross receipts
• u/s 44AD / 44ADA –
o Only residents, HUF and Unlimited Liability Partnership firm are eligible.
o Any business except for light goods vehicle covered u/s 44AE
o No deductions except Chapter VI-A are allowed

Verification of return (i.e. to be signed by whom):

o Individual
- By himself
- By duly authorised person, if he is absent from India
- By guardian or competent person, if he is mentally incapacitated
o HUF
- By Karta
- By any other adult member of the family, if Karta is absent from India or mentally
incapacitated
o Firm
- By managing partner
- By any other partner, if managing partner is unable to verify for unavoidable reasons or where
there is no managing partner
o Company
- By managing director
- By any director, if managing director is unable to verify for unavoidable reasons or where there
is no managing director
o Govt. company – Principal Officer
o Local authority – Principal Officer
o Political Party – Chief Executive Officer, whether known as secretary or any other designation
o College, university or institution – Head of the Institution

Different types of return:

• Original Return [u/s 139(1)]

• Return of loss [u/s 139(3)]
o Company, firm, college/university/institution related to scientific research, resident having assets
located outside India, business trust must file return of loss.
o In other cases submission of return of loss is not mandatory.
o However to avail carry forward of Loss from business or profession, loss under the head ‘Capital Gains’
and loss from activity of owning and maintaining race horses for set off, submission of return of loss
within due date is necessary.
(## To avail carry forward of unabsorbed depreciation for set off, submission of return within due date
is not necessary.)
o Filing of return of loss after due date is allowed in case of loss from house property and also in case of
set off in the same year.
• Belated Return [u/s 139(4)]
o Such return may be submitted at any time before the end of A.Y. or before the completion of assessment
(i.e. the date of assessment order), whichever is earlier.
o Consequences of belated return –
- Loss from business or profession, loss under the head ‘Capital Gains’ and loss from activity of
owning and maintaining race horses cannot be carried forward for set off.
- Deductions u/s 80IA (development of infrastructure), 80IAB (development of SEZ), 80IAC
(start-up), 80IB (mineral oil, food processing, hospital), 80IC, 80ID (hotel in specified area),
80IE (certain undertaking in North-East states), 80JJA (for generating new employment),
80RRB (royalty income from patent) etc. will not be available.
- Interest u/s 234A and Fees u/s 234F will have to be paid.
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• Revised Return [u/s 139(5)]
o Such return may be submitted at any time before the end of A.Y. or before the completion of assessment
(i.e. the date of assessment order), whichever is earlier, if –
- a return u/s 139(1) or 139(4) has already been submitted,
- any omission or wrong statement detected in the return filed u/s 139(1) or 139(4).
o No permission is required for submission of revised return.
o Second revised return may also be submitted within time limit.
o A return pursuant to a notice u/s 142(1) cannot be revised.
o From A.Y. 2017-18, revised return can be filed even for belated return.
o Revised Return can be submitted after receiving the notice or intimation u/s 143(1).
o After issue of scrutiny notice, revised return submitted within time limit is valid.
• Defective Return [u/s 139(9)]
o Return is defective when –
- Annexures, statements and columns have not been duly filled in, and/or
(possible only in case of off-line submission of return)
- Tax audit report has not been submitted within due date, and/or
- Some documents have not been submitted to the A.O. on demand.
o The A.O. may intimate the defect. Defect must be rectified within 15 days* from the date of intimation.
The return will be treated as invalid, if the defect is not rectified.
* Delay may be condoned by the A.O.

PAN:
Permanent Account Number (PAN) is a ten digit alphanumeric number, allotted by the A.O. u/s 139A.
• It is compulsory to apply for PAN, if –
- Total income (taxable) > Tax exemption limit
- Total sales / gross receipts from business / profession > Rs. 5,00,000
- Financial transactions during F.Y. by person other than individual ≥ Rs. 2,50,000
- Religious and charitable institutions
• Quoting PAN is mandatory –
o Fixed Deposit/Term Deposit > Rs. 50,000; Aggregate during F.Y. > Rs. 5 lakh
o Payment in cash at one time against bill to hotel/restaurant > Rs. 50,000
o Deposit with bank in cash per day > Rs. 50,000
o Purchase of bank draft in cash per day > Rs. 50,000
o Payment for travel to foreign country or purchase of foreign currency at one time > Rs. 50,000
o Sale or purchase of motor vehicle (except two wheeler)
o Payment to mutual fund/company or institution for purchasing units/debentures or bonds > Rs. 50,000
o Sale or purchase of securities (except shares of listed companies) > Rs. 1,00,000 per transaction
o Sale or purchase of immovable property > Rs. 10 lakh
o For opening demat account
o Payment of life insurance premium > Rs. 50,000 in aggregate during F.Y.
o Sale or purchase of any goods or services of any nature other than above > Rs. 2 lakh
• Non-residents are exempt to quote PAN in respect of transactions like –
- Payment to hotel or restaurant
- Travel to foreign country
- Purchase of foreign currency
- Purchase of bank draft
- Making application for issue of debit/credit card
- Payment to RBI for acquiring bonds
- Sale or purchase of any goods or services excluding immovable properties, securities etc.
- Payment for prepaid payment instruments

TAN:
Tax deduction and collection Account Number (TAN) is allotted by the A.O. to the person, who deducts or
collects tax at source. TAN is to be quoted in –
- all challans for payment of TDS and TCS
- all certificates of TDS and TCS
- all returns of TDS and TCS
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Self-assessment [Sec. 140A]:
• Computation of self-assessment tax:
Tax on total income
Less: Rebate u/s 87A
Add: Health & Education Cess @ 4%
= Total tax liability for A.Y.
Add: Interest (u/s 234A, 234B, 234C) and fees u/s 234F
Less: TDS, Advance Tax, Tax relief u/s 90, 90A, 91, MAT/AMT credit
= Self-Assessment Tax
• Self-assessment tax (including interest and fee) shall have to be paid before furnishing the return.
• If any short payment of self-assessment tax is made, the amount so paid shall be adjusted against in order of
fee, interest and tax payable.

Summary assessment [Sec. 143(1)]:

In case of such assessment –
o Adjustments are made in respect of arithmetical errors and incorrect claims, which are apparent from
any information in the return.
o Adjustments are made in course of computerised processing of return without any human interface.
o Intimation must be given before such adjustments.
o If no response is received within 30 days from the date of issue of such intimation, such adjustments
shall be made.
o After adjustment, if any sum is payable by or refundable to the assessee, intimation should be sent.
o If no sum is payable by or refundable to the assessee, acknowledgement of return shall be deemed to
be the intimation.
o Such intimation u/s 143(1) is not an assessment order.
o Time limit for completion of summary assessment is one year from the end of financial year in which
the return is filed.

Scrutiny assessment [Sec. 143(3)]:

• Conditions for Scrutiny Assessment:
o A return has to be filed u/s 139 or in response to a notice u/s 142(1), and
o The A.O. considers it necessary to ensure that the assessee has not –
- understated his income, or
- declared excessive loss, or
- under paid the tax.
• Notice for Scrutiny Assessment should be served within 6 months from the end of the month in which the return
is filed.
• Time limit for completion of scrutiny assessment is 12 months from the end of the relevant A.Y.
• Assessment order passed after scrutiny assessment is treated as regular assessment order.

Best judgement assessment [Sec. 144]:

o Such assessment is made by the Assessing Officer to the best of his judgement after considering all
relevant materials.
o The A.O. must give the assessee an opportunity of hearing.
o No refund can be granted.
o In the following situations such assessment can be made:
- If the assessee fails to file return u/s 139(1) or 139(4) or 139(5).
- If he fails to comply with the terms of notice u/s 142(1).
- If he fails to comply with the directions u/s 142(2A) requiring him get his accounts audited (by
an accountant to be nominated by the Chief Commissioner or Commissioner).
- If he fails to comply with the terms of notice u/s 143(2) requiring his presence or production of
evidence and documents.
o The A.O. has the discretionary power to make best judgement assessment, if he is not satisfied with the
correctness or completeness of accounts.
o Time limit for completion of best judgement assessment is 12 months from the end of the relevant A.Y.

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Advance tax:
• Advance tax shall be payable during a financial year in every case where the amount of such advance tax payable
is Rs. 10,000 or more.
• Advance tax payable = Total tax liability – Tax deducted or likely to be deducted at source
• A resident senior citizen having no income from business or profession need not to pay advance tax.
• Due date for payment of advance tax:
o For assessees covered u/s 44AD or 44ADA 100% on or before 15th March of F.Y.
o For others ≥15% on or before 15th June of F.Y.
≥45% on or before 15th September of F.Y.
≥75% on or before 15th December of F.Y.
≥100% on or before 15th March of F.Y.

Interest and Fees:

• Interest for default in furnishing return of income [Sec. 234A]

 Simple interest @ 1% per month or part of month
o When no return is submitted Period from the date following due date to the date of
completion of assessment u/s 144
o When return is submitted Period from the date following due date to the date of
after due date submission of return

 Amount on which interest is to be charged :

Tax on total income
Less: TDS, TCS, Advance Tax, Tax relief u/s 90, 90A, 91, MAT/AMT credit
Less: Self-assessment tax, if paid before due date of filing of return

• Interest for default in payment of advance tax [Sec. 234B]

 Simple interest @ 1% per month or part of month
Case Period Amount on which
Interest is charged

o No advance tax paid April 1 of A.Y. to the date of determination of Assessed tax
income u/s 143(1), or where regular assessment
is made, to the date of such assessment
o Adv. Tax paid < 90% - do - Assessed tax less
Advance tax paid

 Assessed tax = Tax on total income – TDS, TCS, Tax relief u/s 90, 90A, 91, MAT/AMT credit

• Interest for deferment of advance tax [Sec. 234C]

 Simple interest @ 1% per month on the amount of shortfall for 3 months at every time, if occurred.

• Fee [Sec. 234F]

o Rs. 5,000 If return is submitted on or before 31st December of A.Y.
o Rs. 10,000 If return is submitted after 31st December of A.Y.
o Rs. 1,000 If total income ≤ Rs. 5,00,000

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Tax Deducted at Source (TDS):

• TDS from salary is to be calculated by employer on the basis of average rate of income tax, and to be deducted
at the time of payment of salary every month (in equal instalments, which may change depending on increase
or decrease in income).
o Average rate of income tax = (Amount of income tax calculated on total income) ÷ (Total income)
o Total income = Income from salary + Other incomes (if provided along with documents by employee)
o But negative income except loss from house property cannot be adjusted against salary income.
o Claims for exemptions and deductions by employee along with supporting documents may be
considered for calculation of TDS from salary.
o Tax on perquisites borne by employer shall not be grossed up.

• TDS from interest on securities paid to residents is to be calculated @ 10% (no surcharge, no cess) and to be
deducted at the time of credit to account of payee.
• TDS from interest on securities is not applicable for –
- Some national bonds
- 7 year NSC (IV issue)
- Central or State Govt. Securities, including two taxable bonds (interest on which ≤ Rs. 10,000)
- Debentures issued by PSUs, Co-operative Societies etc., as notified by the Central Govt.
- Debentures issued by company in which public are substantially interested, provided interest thereon
≤ Rs. 5,000
- Securities of LIC, GIC
- Listed securities (held in dematerialized form) of companies

• TDS from the payment by way of winning horse race / lottery exceeding Rs. 10,000 made to any person
(resident or non-resident) is to be calculated @ 30% and to be deducted at the time of such payment.
• Tax has to be deducted @ 30% on winning from horse race before setting off of losses therefrom. So, the net
amount, after deduction of tax and losses, has to be paid to the winner.