INDEX

Chapter Title of Chapter Page

No. No.
1 Executive Summary 2
2 Introduction 3
3 Tax Structure In India 5
4 Income Tax Return As per Income 7
Tax Act, 1961
5 Levy of Income Tax 16
6 Assessment & Previous Year 22
7 ITC Forms for an Individuals 25
8 Due date for filing Returns 29
9 Exempt Income (Section 10) 31
10 Deductions in computing total 37
income (Section 80)
11 Steps for Self Registration 47
12 Steps for Filing of Income Tax 50
Return
13 Review of Literature 57
14 Data Analysis 60
15 Conclusion and Suggestions 66
16 References 67

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 EXECUTIVE SUMMARY
Reforming taxation is an on-going process, through which tax policy makers and tax
administrators are continuously adapting their tax system to reflect changing economic,
social and political circumstances. The present study examines the Taxation of Income in
India during post liberalization period and policy perspective in this regard. It has analysed
the growth of income tax revenue, performance of Income Tax Department and perception
of tax professionals regarding Income Tax System in India.
With a view to have a proper understanding of the research topic important studies relating
to personal income tax, capital gains taxation, agricultural taxation, efficiency of income
tax administration etc. conducted in India have been reviewed. For evaluating growth of
income tax revenue in India and performance of the income tax administration secondary
data has been collected mainly from Finance Acts, Explanatory Memorandum on the
Budget of the Central Government, Reports of the various committees/commissions,
Indian Economic Survey, Income Tax Act 1961, Income Tax Rules 1962, various
announcements, circulars and notifications of Central Board of Direct Taxes, Budget
speeches of Finance Ministers, Reports of Comptroller and Auditor General of India on
Direct Taxes for the period 1997-98 to 2007-08. For studying the perception of tax
professionals regarding Income Tax System, data has been collected from tax
professionals i.e. Chartered Accountants practicing in Punjab and Chandigarh (U.T.). For
this purpose, a sample of 250 respondents has been taken by selecting 50 respondents each
from selected four districts of Punjab and 50 respondents from Chandigarh.

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 INTRODUCTION
Income tax department is one of the important departments of Ministry of Finance,
Government of India. This department has come into existence in 1860. The department
followed this act only for five years and, the second act came in force in 1865. There were
major changes in this act as compared to the first act. With this act the income tax
department started working with a new concept of agriculture income. However the
original story of income tax came into existence in 1922 with the implementation of
income tax act 1922. It showed the major changes from the last act by imposing the

charges in the year of assessment on the income of last year. After this, in 1956 the
government revised this act with few changes keeping the original in its format. For its
review, a committee was formed by the government. This committee made few changes
and submitted the income tax bill in Lok Sabha during April 1961. The president accepted
this bill on 13th September, 1961. Since 1961, Government has been using this act for
running Indian taxation system. The system identified few important facts that tax
payment decreases when tax saving investment increases along with the income and
employees preferred to invest in life insurance Corporation, provident fund and national
saving certificate. In 2014, income tax department has established a system for centralized
process of returns and one prominent type is the introduction of electronic filing system
for income tax payers. A system was desired that would make the process of filing of
income tax returns (ITR) easier for taxpayers and as well as reduce the time required for
data entry at tier end of receipt of income tax returns (ITR). Electronic filing is a new and
effective method of filing income tax returns online and has electronic taxes. The major
advantage of electronic filing includes the ease of use, technology, reduction in rush and
saves the time. After using an electronic service over the internet, the public may find that
the electronic service system is easy and useful.

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Why there was an evolution of E-filing system existed? In this era the modern people use
the exclusive technology then the government of India make some possible facts towards
electronic filing, that the taxpayers have been submitted their tax returns online with the 2
help of the website i.e., http://incometaxindiaefiling.gov.in/. Electronic filing comes with
many benefits like Income Tax Payer can file their online return anytime in day or night.
Certainty of delivery and quick confirmation provides immediate confirmation from tax
administration that returns have been received. Tax payer receiving refunds to get them
sooner, privacy and security is assured by government of India. Different drawback related
like chance of data entry errors however in online the transaction can be done
electronically with a click of button. Here accessibility is allowed 24*7*365. The handling
and storing of data and documents is easy. It is the fastest way to file electronic returns
and helps to proceed quickly; even the due date to file is over. Paper returns take
approximately four to six weeks to process. If the filing of returns is done electronically
and choose direct deposit of your refund, the fund will transfer directly in the bank
account within few days. It is free for the income tax payers who are willing to file the
returns. It is a secured process that is using the private network designed to meet the
highest security standards.
Electronic filing is the process of submitting tax returns over the internet, using tax
preparation software that has been pre-approved by relevant tax authority that means the
income tax imposed on the individual or entities (taxpayers) that varies with the income or
profit (taxable income) of the taxpayers. Surprisingly, literature an E-filing in India is
scanty. Keeping this in wind, the present study aimed to find the income taxpayers
perception towards electronic filing among individual, business firms and HUFs.
A tax may be defined as a "pecuniary burden laid upon individuals or property owners to
support the government, a payment exacted by legislative authority. A tax "is not a
voluntary payment or donation, but an enforced contribution, exacted pursuant to
legislative authority". Taxes consist of direct tax or indirect tax, and may be paid in money
or as its labor equivalent (often but not always unpaid labor). India has a well-developed
taxation structure. The tax system in India is mainly a three tier system which is based
between the Central, State Governments and the local government organizations. In most
cases, these local bodies include the local councils and the municipalities. According to
the on situation of India, the government has the right to levy taxes on individuals and
organizations. However, the constitution states that no one has the right to levy or charge 3
taxes except the authority of law. Whatever tax is being charged has to be backed by the
law passed by the legislature or the parliament.

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TAX STRUCTURE IN INDIA:-

Direct Taxes:
A Direct tax is a kind of charge, which is imposed directly on the taxpayer and paid
directly to the government by the persons (juristic or natural) on whom it is imposed. A
direct tax is one that cannot be shifted by the taxpayer to someone else. The some
important direct taxes imposed in India are as under: Income Tax: Income Tax Act, 1961
imposes tax on the income of the individuals or Hindu undivided families or firms or co-
operative societies (other than companies) and trusts (identified as bodies of individuals
associations of persons) or every artificial juridical person. The inclusion of a particular
income in the total incomes of a person for income-tax in India is based on his residential
status. There are three residential status, viz., (i) Resident & Ordinarily Residents
(Residents) (ii) Resident but not Ordinarily Residents and (iii) Non 72 Residents. There
are several steps involved in determining the residential status of a person. All residents
are taxable for all their income, including income outside India. Non-residents are taxable
only for the income received in India or Income accrued in India. Not ordinarily residents
are taxable in relation to income received in India or income accrued in India and income
from business or profession controlled from India.

Corporation Tax:
The companies and business organizations in India are taxed on the income from their
worldwide transactions under the provision of Income Tax Act, 1961. A corporation is
deemed to be resident in India if it is incorporated in India or if it’s control and
management is situated entirely in India. In case of non-resident corporations, tax is levied
on the income which is earned from their business transactions in India or any other Indian
sources depending on bilateral agreement of that country.

Property Tax:
Property tax or 'house tax' is a local tax on buildings, along with appurtenant land, and
imposed on owners. The tax power is vested in the states and it is delegated by law to the
local bodies, specifying the valuation method, rate band, and collection procedures. The
tax base is the annual ratable value (ARV) or area based rating. Owner-occupied and other
properties not producing rent are assessed on cost and then converted into ARV by
applying a percentage of cost, usually six percent. Vacant land is generally exempted from
the assessment. The properties lying under control of Central are exempted from the
taxation. Instead a 'service charge' is permissible under executive order. Properties of
foreign missions also enjoy tax exemption without an insistence for reciprocity.

Inheritance (Estate) Tax:

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An inheritance tax (also known as an estate tax or death duty) is a tax which arises on the
death of an individual. It is a tax on the estate, or total value of the money and property, of
a person who has died. India enforced estate duty from 1953 to 1985. Estate Duty Act,
1953 came into existence w.e.f. 15th October, 1953. Estate Duty on agricultural land was
discontinued under the Estate Duty (Amendment) Act, 1984. The levy of Estate Duty in
respect of property (other than agricultural land) passing on death occurring on or after
16th March, 1985, has also been abolished under the Estate Duty (Amendment) Act, 1985.

Gift Tax:
Gift tax in India is regulated by the Gift Tax Act which was constituted on 1st April, 1958.
It came into effect in all parts of the country except Jammu and Kashmir. As per the Gift
Act 1958, all gifts in excess of Rs. 25,000, in the form of cash, draft, check or others,
received from one who doesn't have blood relations with the recipient, were taxable.
However, with effect from 1st October, 1998, gift tax got demolished and all the gifts
made on or after the date were free from tax. But in 2004, the act was again revived
partially. A new provision was introduced in the Income Tax Act 1961 under section.
According to it, the gifts received by any individual or Hindu Undivided Family (HUF) in
excess of Rs. 50,000 in a year would be taxable.

Merits of Direct Taxes

The larger burden of the direct taxes falls on the rich people who have capacity to bear
these and the poor people with less ability to pay have to bear less burden.
Direct taxes are important instrument of reducing inequalities of income and wealth.
Unlike indirect taxes, direct taxes do not cause distortion in the allocation of resources. As
a result these leave the consumers better off as compared to indirect taxes.
Revenue elasticity of direct taxes, especially if they are of progressive type is quite high.
As the national income increases, the revenue on these taxes also rises a great deal.

Demerits of Direct Taxes

In the direct taxation, people are aware of their tax liability and therefore they would try to
avoid or even evade the taxes. The practice and possibility of tax evasion and avoidance is
more in direct taxes than in case of indirect taxes.
Direct taxes are generally payable in lump sum or even in advance and become quite
inconvenient. Another demerit of direct taxes is their supposed effect on the will to work
and save. It is assessed that work (given Income) and leisure are two alternatives before
any taxpayer. If therefore, a tax is imposed say on income, the taxpayer will find that the
return from work has decreased as compared with return from leisure. He therefore tries to
substitute leisure for work.

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Return of Income Tax as per Income Tax Act, 1961.

Section 139.
(1) Every person,—
(a) Being a company or a firm; or
(b) being a person other than a company or a firm, if his total income or the total income
of any other person in respect of which he is assessable under this Act during the previous
year exceeded the maximum amount which is not chargeable to income-tax, Shall, on or
before the due date, furnish a return of his income or the income of such other person
during the previous year, in the prescribed form and verified in the prescribed manner and
setting forth such other particulars as may be prescribed:
Provided that a person referred to in clause (b), who is not required to furnish a return
under this sub-section and residing in such area as may be specified by the Board in this
behalf by notification in the Official Gazette, and who during the previous year incurs an
expenditure of fifty thousand rupees or more towards consumption of electricity or at any
time during the previous year fulfils any one of the following conditions, namely:—
(i) Is in occupation of an immovable property exceeding a specified floor area, whether
by way of ownership, tenancy or otherwise, as may be specified by the Board in this
behalf; or
(ii) is the owner or the lessee of a motor vehicle other than a two-wheeled motor vehicle,
whether having any detachable side car having extra wheel attached to such two-wheeled
motor vehicle or not; or
(iii) [***]
(iv) Has incurred expenditure for himself or any other person on travel to any foreign
country; or
(v) Is the holder of a credit card, not being an “add-on” card, issued by any bank or
institution; or
(VI) is a member of a club where entrance fee charged is twenty-five thousand rupees or
more,
shall furnish a return, of his income during any previous year ending before the 1 st day of
April, 2005, on or before the due date in the prescribed form and verified in the prescribed
manner and setting forth such other particulars as may be prescribed :
(1A) Without prejudice to the provisions of sub-section (1), any person, being an
individual who is in receipt of income chargeable under the head “Salaries” may, at his
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option, furnish a return of his income for any previous year to his employer, in accordance
with such scheme as may be specified by the Board in this behalf, by notification in the
Official Gazette, and subject to such conditions as may be specified therein, and such
employer shall furnish all returns of income received by him on or before the due date, in
such form (including on a floppy, diskette, magnetic cartridge tape, CD-ROM or any other
computer readable media) and manner as may be specified in that scheme, and in such
case, any employee who has filed a return of his income to his employer shall be deemed
to have furnished a return of income under sub-section (1), and the provisions of this Act
shall apply accordingly.

(1B) Without prejudice to the provisions of sub-section (1), any person, being a company
or being a person other than a company, required to furnish a return of income under sub-
section (1), may, at his option, on or before the due date, furnish a return of his income for
any previous year in accordance with such scheme as may be specified by the Board in
this behalf by notification in the Official Gazette and subject to such conditions as may be
specified therein, in such form (including on a floppy, diskette, magnetic cartridge tape,
CD-ROM or any other computer readable media) and in the manner as may be specified in
that scheme, and in such case, the return of income furnished under such scheme shall be
deemed to be a return furnished under sub-section (1), and the provisions of this Act shall
apply accordingly.

(1C) Notwithstanding anything contained in sub-section (1), the Central Government may,
by notification in the Official Gazette, exempt any class or classes of persons from the
requirement of furnishing a return of income having regard to such conditions as may be
specified in that notification.

(2) Omitted.

(3) If any person who has sustained a loss in any previous year under the head “Profits and
gains of business or profession” or under the head “Capital gains” and claims that the loss
or any part thereof should be carried forward under sub-section (1) of section 72, or sub-
section (2) of section 73, or sub-section (2) of section 73A or sub-section (1) or sub-
section (3) of section 74, or sub-section (3) of section 74A, he may furnish, within the time
allowed under sub-section (1), a return of loss in the prescribed form and verified in the
prescribed manner and containing such other particulars as may be prescribed, and all the
provisions of this Act shall apply as if it were a return under sub-section (1).

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(4) Any person who has not furnished a return within the time allowed to him under sub-
section (1), may furnish the return for any previous year at any time before the end of the
relevant assessment year or before the completion of the assessment, whichever is earlier.
(4A) Every person in receipt of income derived from property held under trust or other
legal obligation wholly for charitable or religious purposes or in part only for such
purposes, or of income being voluntary contributions referred to in sub-clause (iia) of
clause (24) of section 2, shall, if the total income in respect of which he is assessable as a
representative assesse (the total income for this purpose being computed under this Act
without giving effect to the provisions of sections 11 and 12) exceeds the maximum
amount which is not chargeable to income-tax, furnish a return of such income of the
previous year in the prescribed form and verified in the prescribed manner and setting
forth such other particulars as may be prescribed and all the provisions of this Act shall, so
far as may be, apply as if it were a return required to be furnished under sub-section (1).

(4B) The chief executive officer (whether such chief executive officer is known as
Secretary or by any other designation) of every political party shall, if the total income in
respect of which the political party is assessable (the total income for this purpose being
computed under this Act without giving effect to the provisions of section 13A) exceeds
the maximum amount which is not chargeable to income-tax, furnish a return of such
income of the previous year in the prescribed form and verified in the prescribed manner
and setting forth such other particulars as may be prescribed and all the provisions of this
Act, shall, so far as may be, apply as if it were a return required to be furnished under sub-
section (1).

(4D) Every university, college or other institution referred to in clause (ii) and clause (iii)
of sub-section (1) of section 35, which is not required to furnish return of income or loss
under any other provision of this section, shall furnish the return in respect of its income or
loss in every previous year and all the provisions of this Act shall, so far as may be, apply
as if it were a return required to be furnished under sub-section (1).

(4E) Every business trust, which is not required to furnish return of income or loss under
any other provisions of this section, shall furnish the return of its income in respect of its
income or loss in every previous year and all the provisions of this Act shall, so far as may
be, apply if it were a return required to be furnished under sub-section (1).

(4F) Every investment fund referred to in section 115UB, which is not required to furnish
return of income or loss under any other provisions of this section, shall furnish the return

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of income in respect of its income or loss in every previous year and all the provisions of
this Act shall, so far as may be, apply as if it were a return required to be furnished under
sub-section (1).

(5) If any person, having furnished a return under sub-section (1) or sub-section (4),
discovers any omission or any wrong statement therein, he may furnish a revised return at
any time before the end of the relevant assessment year or before the completion of the
assessment, whichever is earlier.

(6) The prescribed form of the returns referred to in sub-sections (1) and (3) of this
section, and in clause (i) of sub-section (1) of section 142 shall, in such cases as may be
prescribed, require the assesse to furnish the particulars of income exempt from tax, assets
of the prescribed nature and value, held by him as a beneficial owner or otherwise or in
which he is a beneficiary, his bank account and credit card held by him, expenditure
exceeding the prescribed limits incurred by him under prescribed heads and such other
outgoings as may be prescribed.

(6A) Without prejudice to the provisions of sub-section (6), the prescribed form of the
returns referred to in this section, and in clause (i) of sub-section (1) of section 142 shall,
in the case of an assessed engaged in any business or profession, also require him to
furnish the report of any audit referred to in section 44AB, or, where the report has been
furnished prior to the furnishing of the return, a copy of such report together with proof of
furnishing the report, the particulars of the location and style of the principal place where
he carries on the business or profession and all the branches thereof, the names and
addresses of his partners, if any, in such business or profession and, if he is a member of
an association or body of individuals, the names of the other members of the association or
the body of individuals and the extent of the share of the assesse and the shares of all such
partners or the members, as the case may be, in the profits of the business or profession
and any branches thereof.

(7) [***]

(8)(a) Where the return under sub-section (1) or sub-section (2) or sub-section (4) for an
assessment year is furnished after the specified date, or is not furnished, then whether or
not the Assessing Officer has extended the date for furnishing the return under sub-section
(1) or sub-section (2), the assesse shall be liable to pay simple interest at fifteen per cent

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per annum, reckoned from the day immediately following the specified date to the date of
the furnishing of the return or, where no return has been furnished, the date of completion
of the assessment under section 144, on the amount of the tax payable on the total income
as determined on regular assessment, as reduced by the advance tax, if any, paid, and any
tax deducted at source :
(9) Where the Assessing Officer considers that the return of income furnished by the
assesse is defective, he may intimate the defect to the assesse and give him an opportunity
to rectify the defect within a period of fifteen days from the date of such intimation or
within such further period which, on an application made in this behalf, the Assessing
Officer may, in his discretion, allow; and if the defect is not rectified within the said
period of fifteen days or, as the case may be, the further period so allowed, then,
notwithstanding anything contained in any other provision of this Act, the return shall be
treated as an invalid return and the provisions of this Act shall apply as if the assesse had
failed to furnish the return :

Permanent account number.

Section 139A.
(1) Every person,—
(i) if his total income or the total income of any other person in respect of which he is
assessable under this Act during any previous year exceeded the maximum amount which
is not chargeable to income-tax; or
(ii) carrying on any business or profession whose total sales, turnover or gross receipts are
or is likely to exceed five lakh rupees in any previous year; or
(iii) Who is required to furnish a return of income under sub-section (4A) of section 139;
or
(iv) Being an employer, who is required to furnish a return of fringe benefits under section
115WD, 26[or]
(v) being a resident, other than an individual, which enters into a financial transaction of
an amount aggregating to two lakh fifty thousand rupees or more in a financial year; or
(vi) who is the managing director, director, partner, trustee, author, founder, karta, chief
executive officer, principal officer or office bearer of the person referred to in clause (v) or
any person competent to act 27[on behalf of the person referred to in clause (v); or

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(vii) Who intends to enter into such transaction as may be prescribed by the Board in the
interest of revenue,
And who has not been allotted a permanent account number shall, within such time, as
may be prescribed, apply to the Assessing Officer for the allotment of a permanent
account number.

Quoting of Aadhaar number.

Section 139AA.
(1) Every person who is eligible to obtain Aadhaar number shall, on or after the 1st day of
July, 2017, quote Aadhaar number—
(i) In the application form for allotment of permanent account number;
(ii) In the return of income:
Provided that where the person does not possess the Aadhaar Number, the Enrolment ID
of Aadhaar application form issued to him at the time of enrolment shall be quoted in the
application for permanent account number or, as the case may be, in the return of income
furnished by him.

(2) Every person who has been allotted permanent account number as on the 1st day of
July, 2017, and who is eligible to obtain Aadhaar number, shall intimate his Aadhaar
number to such authority in such form and manner as may be prescribed, on or before a
date to be notified by the Central Government in the Official Gazette:
Provided that in case of failure to intimate the Aadhaar number, the permanent account
number allotted to the person shall be 32[made inoperative after the date so notified in such
manner as may be prescribed].

(3) The provisions of this section shall not apply to such person or class or classes of
persons or any State or part of any State, as may be notified by the Central Government in
this behalf, in the Official Gazette.
Explanation.—for the purposes of this section, the expressions—

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(i) "Aadhaar number", "Enrolment" and "resident" shall have the same meanings
respectively assigned to them in clauses (a), (m) and (v) of section 2 of the Aadhaar
(Targeted Delivery of Financial and other Subsidies, Benefits and Services) Act, 2016 (18
of 2016);
(ii) "Enrolment ID" means a 28 digit Enrolment Identification Number issued to a resident
at the time of enrolment.

Scheme for submission of returns through Tax Return

Preparers.

Section 139B.
For the purpose of enabling any specified class or classes of persons in preparing and
furnishing returns of income, the Board may, without prejudice to the provisions of section
139, frame a Scheme, by notification in the Official Gazette, providing that such persons
may furnish their returns of income through a Tax Return Preparer authorized to act as
such under the Scheme.
Every Tax Return Preparer shall assist the persons furnishing the return of income in such
manner as may be specified in the Scheme framed under this section and affix his
signature on such return.
(3) For the purposes of this section,—
(a) “Tax Return Preparer” means any individual, [not being a person referred to in clause
(ii) or clause (iii) or clause (iv) of sub-section (2) of section 288 or an employee of the
“specified class or classes of persons”], who has been authorized to act as a Tax Return
Preparer under the Scheme framed under this section;
(b) “specified class or classes of persons” means any person, other than a company or a
person, whose accounts are required to be audited under section 44AB or under any other
law for the time being in force, who is required to furnish a return of income under this
Act.
(4) The Scheme framed by the Board under this section may provide for the following,
namely:—
(a) The manner in which and the period for which the Tax Return Preparers shall be
authorized under sub-section (3);

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(b) The educational and other qualifications to be possessed, and the training and other
conditions required to be fulfilled, by a person to act as a Tax Return Preparer; The code
of conduct for the Tax Return Preparers;
(d) The duties and obligations of the Tax Return Preparers; The circumstances under
which the authorization given to a Tax Return Preparer may be withdrawn;
(f) Any other matter which is required to be, or may be, specified by the Scheme for the
purposes of this section.
(5) The Scheme framed by the Board under this section shall be laid, as soon as may be
after it is framed, before each House of Parliament, while it is in session, for a total period
of thirty days which may be comprised in one session or in two or more successive
sessions, and if, before the expiry of the session immediately following the session or the
successive sessions aforesaid, both Houses agree in making any modification in the
Scheme or both Houses agree that the Scheme should not be framed, the Scheme shall
thereafter have effect only in such modified form or be of no effect, as the case may be; so,
however, that any such modification or annulment shall be without prejudice to the
validity of anything previously done under that Scheme.

Power of Board to dispense with furnishing documents, etc.,

with return.
Section 139C.
The Board may make rules providing for a class or classes of persons who may not be
required to furnish documents, statements, receipts, certificates, reports of audit or any
other documents, which are otherwise under any other provisions of this Act,
except section 139D, required to be furnished, along with the return but on demand to be
produced before the Assessing Officer.
(2) Any rule made under the proviso to sub-section (9) of section 139 as it stood
immediately before its omission by the Finance Act, 2007 shall be deemed to have been
made under the provisions of this section.

Filing of return in electronic form.

Section 139D.
The Board may make rules providing for—
(a) The class or classes of persons who shall be required to furnish the return in electronic
form;

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(b) The form and the manner in which the return in electronic form may be furnished;
(c) the documents, statements, receipts, certificates or audited reports which may not be
furnished along with the return in electronic form but shall be produced before the
Assessing Officer on demand;
(d) The computer resource or the electronic record to which the return in electronic form
may be transmitted.

Circulars and Notifications

Circulars
• Circulars are issued by the CBDT from time to time to deal with certain specific
problems and to clarify doubts regarding the scope and meaning of certain provisions of
the Act.
• Circulars are issued for the guidance of the officers and/or assesses.
• The department is bound by the circulars. While such circulars are not binding on the
assesses, they can take advantage of beneficial circulars.

Notifications
Notifications are issued by the Central Government to give effect to the provisions of the
Act. The CBDT is also empowered to make and amend rules for the purposes of the Act
by issue of notifications.

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 Levy of Income-tax
Income-tax is a tax levied on the total income of the previous year of every person
(Section 4).
A person includes an individual, Hindu Undivided Family (HUF), Association of Persons
(AOP), Body of Individuals (BOI), a firm, a company etc.

Total Income and Tax Payable

Income-tax is levied on an assessee’s total income. Such total income has to be computed
as per the provisions contained in the Income-tax Act, 1961.
Let us go step by step to understand the procedure for computation of total income of an
individual for the purpose of levy of income-tax –
Step 1 – Determination of Residential Status
The residential status of a person has to be determined to ascertain which income is to be
included in computing the total income.
The residential status as per the Income-tax Act, 1961 can be classified as under –

In the case of an individual, the duration for which he is present in India determines his
residential status. Based on the time spent by him, he may be (a) resident and ordinarily
resident, (b) resident but not ordinarily resident, or (c) non-resident. The residential status
of a person determines the taxability of the income. For e.g., income earned outside India
will not be taxable in the hands of a non-resident but will be taxable in case of a resident
and ordinarily resident.

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Step 2. Classification of Income under different Heads
The Act prescribes five heads of income. These are shown below –

There is a charging section under each head of income which defines the scope of income
chargeable under that head. These heads of income exhaust all possible types of income
that can accrue to or be received by the tax payer. Accordingly, the income is classified as
follows:
1. Salary, pension earned is taxable under the head “Salaries”
2. Rental income is taxable under the head “Income from house property”.
3. Income derived from carrying on any business or profession is taxable under the
head “Profits and gains from business or profession”.
4. Profit from sale of a capital asset (like land) is taxable under the head “Capital
Gains”.
5. The fifth head of income is the residuary head. The income which is not taxable
under the first four heads will be taxed under the head “Income from other
sources”. The tax payer has to classify the income earned under the relevant head
of income.
Step 3– Computation of Income under each Head
Income is to be computed in accordance with the provisions governing a particular head of
income.
Exemptions: There are certain incomes which are wholly exempt from income-tax e.g.
agricultural income. These incomes have to be excluded and will not form part of Gross
Total Income.
Also, some incomes are partially exempt from income-tax e.g. House Rent Allowance,
Education Allowance. These incomes are excluded only to the extent of the limits
specified in the Act. The balance income over and above the prescribed exemption limits
would enter computation of total income and have to be classified under the relevant head
of income.

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Deductions: There are deductions and allowances prescribed under each head of income.
For example, while calculating income from house property, municipal taxes and interest
on loan are allowed as deduction. Similarly, deductions and allowances are prescribed
under other heads of income. These deductions etc. have to be considered before arriving
at the net income chargeable under each head.
Step 4 – Clubbing of Income of Spouse, Minor Child etc.
In case of individuals, income-tax is levied on a slab system on the total income. The tax
system is progressive i.e. as the income increases, the applicable rate of tax increases.
Some taxpayers in the higher income bracket have a tendency to divert some portion of
their income to their spouse, minor child etc. to minimize their tax burden. In order to
prevent such tax avoidance, clubbing provisions have been incorporated in the Act, under
which income arising to certain persons (like spouse, minor child etc.)Have to be included
in the income of the person who has diverted his income for the purpose of computing tax
liability.

Step 5 – Set-off or Carry Forward and Set-Off of Losses

An assessee may have different sources of income under the same head of income. He
might have profit from one source and loss from the other. For instance, an assesse may
have profit from his textile business and loss from his printing business. This loss can be
set-off against the profits of textile business to arrive at the net income chargeable under
the head “Profits and gains of business or profession”.
Similarly, an assessee can have loss under one head of income, say, Income from house
property and profits under another head of income, say, profits and gains of business or
profession. There are provisions in the Income-tax Act, 1961 for allowing inter-head
adjustment in certain cases.
However, there are also restrictions in certain cases, like business loss is not allowed to be
set-off against salary income. Further, losses which cannot be set-off in the current year
due to inadequacy of eligible profits can be carried forward for set-off in the subsequent
years as per the provisions contained in the Act.

Step 6 – Computation of Gross Total Income

The final figures of income or loss under each head of income, after allowing the
deductions, allowances and other adjustments, are then aggregated, after giving effect to
the provisions for clubbing of income and set-off and carry forward of losses, to arrive at
the gross total income.

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Step 7 – Deductions from Gross Total Income
There are deductions prescribed from Gross Total Income.
Step 8 – Total income
The income arrived at, after claiming the above deductions from the Gross Total Income is
known as the Total Income. It should be rounded off to the nearest multiple of ₹ 10.
The process of computation of total income is shown hereunder –

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Step 9 – Application of the rates of tax on the Total Income
The rates of tax for the different classes of assesses are prescribed by the Annual. For
individuals, HUFs etc., there is a slab rate and basic exemption limit. At present, the basic
exemption limit is ₹ 2,50,000 for individuals. This means that no tax is payable by
individuals with total income of up to ₹ 2, 50,000. Those individuals whose total income
is more than ₹ 2, 50,000 but less than ₹5, 00,000 have to pay tax on their total income in
excess of ₹ 2,50,000 @ 5% and so on. The highest rate is 30%, which is attracted in
respect of income in excess of ₹ 10, 00,000. The tax rates have to be applied on the total
income to arrive at the income-tax liability.
Step 10 - Surcharge / Rebate under section 87A
Surcharge: Surcharge is an additional tax payable over and above the income-tax.
Surcharge is levied as a percentage of income-tax. In case where the total income of an
individual/HUF/AOP/BOI exceeds ₹ 50 lakhs but does not exceed ₹ 1 crore, surcharge is
payable at the rate of 10% of income-tax and in case total income exceeds ₹ 1 crore,
surcharge is payable at the rate of 15% of income-tax.
Rebate under section 87A: In order to provide tax relief to the individual tax payers who
are in the 5% tax slab, section 87A provides a rebate from the tax payable by an assessee,
being an individual resident in India, whose total income does not exceed ₹ 3,50,000. The
rebate shall be equal to the amount of income-tax payable on the total income for any
assessment year or an amount of ₹ 2,500, whichever is less.
Level of Total Income Surcharge Rebate u/s 87A
Income-tax on total income or ₹ 2,500,
≤ ₹ 3,50,000 Not applicable whichever is less
>₹ 3,50,000 ≤ ₹ 50,00,000 Not applicable Not applicable
>₹ 50,00,000 ≤ ₹ 10% of income-
1,00,00,000 tax Not applicable
15% of income-
>₹ 1,00,00,000 tax Not applicable

Step 11 – Education cess and secondary and higher education cess on income-tax
The income-tax, as increased by the surcharge or as reduced by the rebate under section
87A, if applicable, is to be further increased by an additional surcharge called education

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cess@2% and secondary and higher education cess on income-tax @1% of income-tax
plus surcharge, if applicable.

Step 12 – Advance tax and tax deducted at source

Although the tax liability of an assessee is determined only at the end of the year, tax is
required to be paid in advance in four installments on the basis of estimated income i.e., on
or before 15th June, 15th September, 15th December and 15th March.
However, residents opting for presumptive taxation scheme can pay advance tax in one
installment on or before 15th March instead of four installments. In certain cases, tax is
required to be deducted at source from the income by the payer at the rates prescribed in
the Income-tax Act, 1961 or the Annual Finance Act. Such deduction should be made
either at the time of accrual or at the time of payment, as prescribed by the Act.
For example, in the case of salary income, the obligation of the employer to deduct tax at
source arises only at the time of payment of salary to the employees. However, in respect
of other payments like, fees for professional services, fees for technical services, interest
made to residents, the person responsible for paying is liable to deduct tax at source at the
time of credit of such income to the accounts of the payee or at the time of payment,
whichever is earlier. Such tax deducted at source has to be remitted to the credit of the
Central Government through any branch of the RBI, SBI or any authorized bank.
Step 13: Tax Payable/Tax Refundable
After adjusting the advance tax and tax deducted at source, the assessee would arrive at the
amount of net tax payable or refundable. Such amount should be rounded off to the nearest
multiple of ₹ 10. The assessee has to pay the amount of tax payable (called self-
assessment tax) on or before the due date of filing of the return. Similarly, if any refund is
due, assesse will get the same after filing the return of income.

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Assessment year
The term has been defined under section 2(9). This means a period of 12 months
commencing on 1st April every year. The year in which income is earned is the previous
year and such income is taxable in the immediately following year which is the assessment
year. Income earned in the previous year 2018-19 is taxable in the assessment year 2019-
20.

Previous year

The term has been defined under section 3. It means the financial year immediately
preceding the assessment year. As mentioned earlier, the income earned during the
previous year is taxable in the assessment year.
Business or profession newly set up during the financial year - In such a case, the previous
year shall be the period beginning on the date of setting up of the business or profession
and ending with 31st March of the said financial year.
If a source of income comes into existence in the said financial year, then the previous
year will commence from the date on which the source of income newly comes into
existence and will end with 31st March of the financial year.

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There are many occasions when the Assessing Officer detects cash credits, unexplained
investments, unexplained expenditure etc., the source for which is not satisfactorily
explained by the assessee to the Assessing Officer. The Act contains a series of provisions
to provide for these contingencies:
Cash Credits.
Where any sum is found credited in the books of the assessee and the assessee offers no
explanation about the nature and source or the explanation offered is not satisfactory in the
opinion of the Assessing Officer, the sum so credited may be charged as income of the
assessee of that previous year.
Unexplained Investments
[Where in the financial year immediately preceding the assessment year, the assesse has
made investments which are not recorded in the books of account and the assessee offers
no explanation about the nature and the source of investments or the explanation offered is
not satisfactory, the value of the investments are taxed as income of the assessee of such
financial year.
Unexplained money
Where in any financial year
the assessee is found to be
the owner of any money,
bullion, jewelry or other
valuable article and the
same is not recorded in the
books of account and the
assessee offers no
explanation about the nature
and source of acquisition of
such money, bullion etc. or
the explanation offered is
not satisfactory, the money
and the value of bullion etc.
may be deemed to be the
income of the assessee for
such financial year.
Ownership is important and
mere possession is not
enough.
Amount of investments etc., not fully disclosed in the books of account

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Where in any financial year the assessee has made investments or is found to be the owner
of any bullion, jewelry or other valuable article and the Assessing Officer finds that the
amount spent on making such investments or in acquiring such articles exceeds the
amount recorded in the books of account maintained by the assessee and he offers no
explanation for the difference or the explanation offered is unsatisfactory, such excess may
be deemed to be the income of the assessee for such financial year.
Unexplained expenditure
Where in any financial year an assessee has incurred any expenditure and he offers no
explanation about the source of such expenditure or the explanation is unsatisfactory the
Assessing Officer can treat such unexplained expenditure as the income of the assesse for
such financial year. Such unexplained expenditure which is deemed to be the income of
the assessee shall not be allowed as deduction under any head of income.
Amount borrowed or repaid on hundi
Where any amount is borrowed on a hundi or any amount due thereon is repaid other than
through an account-payee cheque drawn on a bank, the amount so borrowed or repaid
shall be deemed to be the income of the person borrowing or repaying for the previous
year in which the amount was borrowed or repaid, as the case may be. However, where
any amount borrowed on a hundi has been deemed to be the income of any person, he will
not be again liable to be assessed in respect of such amount on repayment of such amount.
The amount repaid shall include interest paid on the amount borrowed.

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 ITR Forms for an Individuals

Income Tax Return is the form in which assesse files information about his Income and
tax thereon to Income Tax Department. Various forms are ITR 1, ITR 2, ITR 3, ITR 4,
ITR 5, ITR 6 and ITR 7. When you file a belated return, you are not allowed to carry
forward certain losses.
The Income Tax Act, 1961, and the Income Tax Rules, 1962, obligates citizens to file
returns with the Income Tax Department at the end of every financial year.[2] These
returns should be filed before the specified due date. Every Income Tax Return Form is
applicable to a certain section of the Assesses. Only those Forms which are filed by the
eligible Assesses are processed by the Income Tax Department of India. It is therefore
imperative to know which particular form is appropriate in each case. Income Tax Return
Forms vary depending on the criteria of the source of income of the Assesse and the
category of the Assesse.

ITR-1 Form

ITR-1 form is an essential x form| Income Tax Return form]] for Indian citizens filing
their tax returns with the Income Tax Department. This form is issued by the Income Tax
Department of India and is an integral part of the rules laid down by the Government of
India for filing Income Tax Returns.

Eligible individuals for ITR-1 SAHAJ (Hindi terminology meaning

'easy')
 Individuals who have earned their Income for a Financial Year only through the
following means are eligible to fill the ITR-1 SAHAJ form.
 Through Salary or Pension
 Through One House Property (except in case of losses brought forward from
preceding years)
 Through other sources apart from Lottery, Racehorses, Legal Gambling etc. Other
sources include FD interest, spousal pension etc.
 In case of clubbed Income Tax Returns, where a spouse or a minor. Is included in
the tax returns, this can be done only if their income too is limited to the
specifications laid down above.

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Non-eligible individuals for ITR-1 SAHAJ
 Individuals who are not eligible to fill the ITR-1 SAHAJ form are those who have
earned Income through the following means: [4]
 Through more than one piece of Property
 Through Lottery, Racehorses, Legal Gambling etc.
 Through non tax-exempted capital gains, Short term as well as Long term
 Through exempted income exceeding Rs. 5000
 Through Business and Professions
 Loss under the head other sources
 Any Person claiming relief under section 90 and/or 91
 Having Total Income more than Rs 5 million
 If any Resident Individual who has any Income from any source outside India or
has any asset outside India or has signing authority in any account located outside
India

Submission of ITR-1 SAHAJ form

The form can be submitted physically at any Income Tax Returns Office. An
Acknowledgment Receipt can be obtained upon submission. In case of Electronic Filing of
the form there are two alternatives. Firstly, if a Digital Signature is obtained, the Form is
uploaded online. Secondly, the Form is downloaded, printed, signed, and a copy of the
acknowledgement is sent by post to the Income Tax Department's office in Bengaluru.
ITRV can now be verified online using Aadhaar Card or Electronic Verification Code
(EVC). The EVC can be generated either via One Time Password sent to email and
registered mobile number (if income is less than INR 500,000) or via Net Banking. After
online verification Income Tax Assesses is not required to send ITRV to Bangalore CPC.

ITR-2 Form

The ITR-2 Form is an important Income Tax Return form used by Indian citizens as well
as Non Residents to file their Tax Returns with the Income Tax Department of India. The
Income Tax Act, 1961, and the Income Tax Rules, 1962, require citizens to file their tax

26 | P a g e
returns with the Income Tax Department at the end of every financial year and this form is
a part of the filing process as specified by the Government of India.
The due date for filing return with the Income Tax Department of India is 31 July every
year. This is subject to change only if a directive to this effect is issued by the Income Tax
Department or the Ministry of Finance, India. The Financial Year ends on 31 March every
year so Assesses have a period of four months to prepare their Income Tax Returns.

Eligibility for the ITR-2 Form

The use of the ITR-2 Form is applicable to the following means of income only. This form
is available for both Individuals as well as Hindu Undivided Families. Individuals earning
an income only through the following means are eligible to fill and submit the form to the
Income Tax Department.
 Earning Income through a salary or pension
 Income through House Property.
 Earning Income through capital gains (Short Term and Long Term)
 Earnings through Other Sources (includes Income through Lottery Winnings,
through bets on Racehorses, and other Legal methods of Gambling)
The Income Tax Returns, if clubbed together with that of a spouse, minor child etc. needs
to ensure that their sources of income are similar to those stated above. Only then can their
returns be filed together. A difference of earnings in even one category makes the Assesse
liable to fill a separate and applicable Income Tax Returns Form.

Non-eligibility for the ITR-2 Form

 Any Individual or Hindu Undivided Family whose income, in whole or in part, is
earned either through a Business or a Profession.
 Individuals who are eligible to fill the ITR-1 SAHAJ form.
 An individual who is designated as a partner in a Partnership Firm is not eligible to
fill the ITR-2 Form.
 Special concession for salaried personnel
Salaried personnel who earn an income of Rupees Five Lakh or less are exempted from
filing Tax Returns as per the directive of the Income Tax Department of India. This rule
however is only applicable to those who earn less than Rupees Ten Thousand as Income
by way of Interest earned through their Savings Bank Accounts. Those who earn Rupees
Ten Thousand or more are required to file their Tax Returns.

E-filing compulsory for a certain section of Income Earners

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The Central Board of Direct Taxes (CBDT) has made it compulsory for Individual and
Hindu Undivided Families earning an income in excess of Rupees Five Lakh to file their
Tax Returns only through the E-Filing Process. The manual filing of returns is no more an
option for Assesses who come under this category. Electronic Filing of their Tax Returns
is the only way to filing the income tax return for the Individual and HUFs

ITR-3 Form

The ITR-3 Form particularly applies to those Individuals and Hindu Undivided Families
who are registered as Partners in a firm. As per Rule 12 of the Income Tax Rules, 1962,
this form does not apply to those who are Proprietors of a firm. It is mainly for the
business which includes partnership deals. It is also applicable for professionals but it
should be a partnership profession.

Eligible Assesses for the ITR-3 Form

The eligibility criteria of every Income Tax Return form are governed by a set of rules and
conditions. The ITR-3 Form is applicable only to those Individuals and Hindu Undivided
Families that can be placed under the following categories
 Is a Partner in a firm
 Gains Income through ‘Profits or gains of business or profession’
 Gains Income by means of interest, salary, bonus, commission, remuneration, as a
partner
If the partner of a firm only earns income from the firm as a share in the profits and not by
any other means such as interest, bonus, salary, remuneration, or commission etc. then
such an Individual or Hindu Undivided Family should file Income Tax Returns using only
the ITR-3 Form, and not the ITR-2 Form.

Non-eligible Assesses for the ITR-3 Form

Individuals and Hindu Undivided Families who are not eligible to fill the ITR-3 Form are
those who have earned Income through a Business or Profession operated as a
Proprietorship firm.[8] Assesses, who apart from being a partner in a firm, also have
sources of income from a business or profession, including the speculation market, are
also not eligible to file their Income Tax Returns through this form.

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 ITR-4 Form
The ITR-4 Form is applicable to those individual and Hindu Undivided Families who want
to declare their income from Business or Profession under Presumptive Income Scheme of
Income Tax under Section 44AD, Sec 44ADA and Section 44AE of the Income Tax Act.

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 Due date for filing returns

Due dates of filing income tax return for FY 2018–19 (AY 2019–20) are as under:
Particulars AY: 2019-20 Due Date
Individuals, HUF, BOI, AOP (Income Tax Return by Assesse 31st August 2019
whose Books of Account are not required)
Due date of filing the Income Tax Return by businesses 31st August 2019
whose Books of Account are not required to be audited
Filing ITR Due Date for (Assesse who are required to furnish 30th November 2019
report under sec 92E)[TRANSFER PRICING]
Due date of filing the Income Tax Return by businesses 30th September 2019
whose Books of Account require an audit

Penalty on late filing of ITR (effective from 1st April 2018)

As per the new law from this year, Individuals will have to pay late fee after last date to
file income tax return for the FY 2018-19
Rs 5000 if tax is filed after due date of 31st Aug but on before 31 December of that
assessment year (in this case 31 December 2019)
Rs 10,000 if tax is filed after 31 December but on or before 31 March of the relevant
assessment year (in this case from 1 January to 31 March 2020.
If you are a small taxpayer whose gross total income does not exceed Rs 5 lakh then the
maximum fees you are liable to pay is Rs 1,000. This law of levying late filing fees under
section 234F was introduced in the Budget 2017 and became effective for financial year
2017-18 or assessment year 2018-19 onward. Assessment year is the year immediately
following the financial year for which the ITR is filed. The assessment year for the
financial year 2018-19 is 2019-20.

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Who will not have to pay?

However, chartered accountants are of the view that if a person whose gross total income
does not exceed the basic exemption limit files a belated return, he/she will not be liable to
pay penalty. Currently, the basic exemption limit for resident individuals below the age of
60 years is Rs 2.5 lakh. For senior citizens aged 60 years and above but below 80 years,
income up to Rs 3 lakh is exempted from tax. For super senior citizens i.e. of age 80 years
and above, the basic exemption limit is to Rs 5 lakh.

This can be explained with the example of a resident individual aged less than 60 years.
Suppose in a particular financial year you have earned salary income of Rs 2.45 lakh and
interest income from savings bank account Rs 6,000. Remember, you are allowed a
deduction on the interest earned from savings bank account under section 80TTA up to Rs
10,000. Here, the total income is Rs 2.51 lakh. Therefore, you will be liable to pay penalty
as mentioned under section 234F if you file a belated return despite being zero tax
liability.

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 Exempt Income (Section 10)
Section 10(1) – Agriculture Income Exemption

 As per section 10(1), agricultural income earned by the taxpayer in India is exempt
from tax. Any rent or revenue derived from land used for agricultural purposes or
agricultural produce to sell in the market.
 Any income from farm house subject to certain satisfactory conditions specified in
section 2(1A) would be exempt.

Section 10(2) – Amount received by a member of the HUF from the income of the
HUF, or in case of impartible estate out of income of family estate

Section 10(2a) – Share of profit from Partnership Firm

Section 10(4) of Income Tax Act – Certain Interest to Non-Residents

Any income earned by way of interest on certain notified securities or bonds (income by
way of premium on the redemption of such bonds) or NRE account in the hands of
individual taxpayer, is exempt from tax.

Section 10(4)(ii) – Interest to Non-Resident on Non-Resident (External) Account

 Any income by way of interest on money standing to his credit in a Non-Resident

(External) Account in any bank in India shall be exempt from tax in case of an
individual;
 Who is a person resident outside India or is a person who has been permitted by the
RBI to maintain the aforesaid account.
 The person residing outside India shall have the same meaning as defined under
Foreign Exchange Regulation Act, 1973, FEMA, 1999.
 This exemption shall not be available on any income by way of interest paid or
credited on or after 1-4-2005.

Section 10(5) – Leave Travel Concession

 An employee can claim exemption under section 10(5) in respect of Leave Travel
Concession.
 Exemption under section 10(5) is available to all employees (i.e. Indian as well as
foreign citizens).
 Exemption is available in respect of value of any travel concession or assistance
received or due to the employee from his employer (including former employer) for

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 himself and his family members in connection with his proceeding on leave to any
place in India.

Section 10(6) – Remuneration received by an individual who is not a citizen of India

 Such individuals include ambassadors or other officials of the Embassy, High

Commission or Legation of a foreign State in India, Consulate Officer of a foreign
State in India and trade commissioner or other official representatives in India of a
foreign State
 The remuneration received an employee of a foreign enterprise for services rendered
in India, provided:
a) The foreign enterprise is not engaged in any trade or business in India;
b) His stay in India does not exceed in the aggregate a period of 90 days in such
previous year; and
c) Such remuneration is not liable to be deducted from the income of the
employer chargeable under this Act

Section 10(7) of the Income Tax Act – Perquisites and Allowances paid by
Government to its Employees serving outside India

 All the perquisites and allowances paid by the Government to its employees for
services rendered outside India are exempt from tax.
 This exemption is allowed only to such employees of the Government who are
citizens of India.

Section 10(10CC) - Tax on Perquisites paid by employer

 Sometimes for non-monetary perquisites employer pay tax on behalf of employee in

that case the tax so paid by the employer is treated as exempt in the hands of the
employee.

Section 10(10d) – LIC Tax Exemption

Section 10(11) of Income Tax Act – Payment from Statutory Provident Fund

Any payment received on statutory provident fund related to employer’s contribution,

interest, amount received on termination will be exempted.

Special Allowance Exemption u/s 10(14)

In the Income tax Act, there are certain allowances which are characterized as special
allowances and they are fully exempt from tax. Such allowances are listed below:
 Allowances granted to High Court Judges

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  Allowance given to a UNO employee
 Sumptuary allowance received by Supreme Court and High Court judge
 Allowances granted to government employees who are Indian citizens, working
abroad

Section 10(15) – Interest income exempt from tax

Interest incomes which are exempt under section 10(15)

Section 10(16) – Stipend Scholarship

 Scholarship is free education to students. It covers the cost of education like

tuition fees and other related expenses.
 The scholarship may have been given by Govt., University, Board, Trust, etc. is
exempt to the fullest amount.
Section 10(18) of Income Tax Act – Pension received by certain winners of gallantry
awards

Individual who has received any of the gallantry awards stated below will have to pay no
taxes on their pension:

service to Central or State Government

awarded ‘Param Vir Chakra’ or ‘Mahavir Chakra’ or ‘Vir Chakra’ or such other
notified gallantry awards
Also, any amount received as a family pension by any member of the family of such an
individual will also qualify for exemption u/s 10(18).

Section 10(19) of Income Tax Act – Family pension received by family members of
armed forces including paramilitary forces

Family pension received by the widow or children or nominated heirs of a member of the
armed forces (including paramilitary forces) where the death of such member has occurred
in the course of operational duty is fully exempt. W.E.F 01/04/2005.

Section 10(19A) – Income from one palace of a former ruler

 Annual value of any one palace or a portion of a palace in the occupation of a former
ruler shall be exempted.
 But in case such palace or a portion of a palace is let out, its income shall not be
exempted.
Section 10(20) – Income of a local authority

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The following income of a local authority is exempt from tax:
 Income which is chargeable under the head “Income from house property”,
“Capital gains” or “Income from other sources” or
 Income from a trade or business carried on by it which accrues or arises from the
supply of a commodity or service (not being water or electricity) within its own
jurisdictional area or
 Income from business of supply of water or electricity within or outside its own
jurisdictional area.

Section 10(23D) – Tax free mutual funds

Any income of following mutual funds (subject to provisions of sections 115R to 115T) is
exempt from tax:
 A mutual fund registered under the Securities and Exchange Board of India Act or
regulation made thereunder.
 A mutual fund set-up by a public sector bank, or a public financial institution or
authorized by RBI (subject to conditions notified by the Central Government).
Section 10(23DA) – Exemption of income from securitization trust

Any person who is an investor of securitization trust receives any income from such a
trust, by way of distributed income shall be exempt.

Section 10 (34A) – Exemption of income to a shareholder on buyback of shares of

unlisted company

Any income arising on buyback of shares by the company as referred to in section 115QA
will be exempt from tax.

Section 10(35) – Income from units of UTI and other mutual funds

All the below following are exempt:

 Dividend income covered by section -115-O
 Income in respect of units of a mutual fund
 Income received by unit holder of UTI
 Income earned units of a specified company
Note:
1. Under section 115-O and section 115R, the person paying the dividends on share
or income on units will have to pay distribution tax on dividend/income
distributed.

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 2. It should be noted that under this clause, Income on the transfer of units is not
exempt.
Section 10(36) – Income from sale of shares in certain cases

The transfer of a long-term capital asset for arising any income, when a company
purchases eligible equity shares held for a period of 12 months or more shall be exempt.

Section 10(37) – Capital Gain on compulsory acquisition of urban Agricultural Land

Any income chargeable under the head “Capital Gain” arising from the transfer of
agriculture land shall be exempt.

Section 10(38) of income tax act – Long Term Capital Gain on transfer of shares and
securities covered under Security Transaction Tax (STT)

When the transfer of securities are not chargeable to tax to any individual then long-term
capital arises, following conditions should be satisfied:
 At the time of transfer, transactions must be liable to securities transactions tax.
 At the time of transfer of assets, it should be equity shares or a unit of a business trust
or units of an equity oriented mutual fund.
 Assets must be a long-term capital asset.
 Transfer must be taken place on or after October 1, 2004.

Section 10(39) – Income from international sporting event

Any specified income (which is from such international event and which is notified by the
Central Govt.) of specified persons from any international event held in India shall be fully
exempted if;
 Such event is approved by the international body regulating the international sport
relating to such event.
 It has participation by more than two countries; and
 Is notified by the Central Govt. in this regard.
Section 10(40) – Income received as grant by a subsidiary company

Income of any subsidiary company by way of grant or otherwise received from its Indian
holding company which is engaged in the business of generation/ transmission/distribution
of power is exempt, only if;
 Such receipt is for settlement of dues in connection with reconstruction
 Or revival of an existing business of power generation.

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The exemption is available if the reconstruction or revival is by way of transfer of business
to the Indian company notified under section 80 IA(4)(v)(a).

Section 10(43) – Reverse mortgage

Any amount received by an individual as a loan, either in lump-sum or in instalment in a

transaction of reverse mortgage referred in clause (xvi) of Section 47 shall be exempted.

Section 10(44) – New Pension System Trust

Any income received by any person for, or on behalf of the New Pension System Trust
established on 27th February, 2008 shall be exempted.

Section 10 (45) – Exemption of Allowance or perquisite to chairman/member of

UPSC

Any allowance or perquisite, as may be notified by the Central Government in the Official
Gazette, in this behalf, paid to the chairman or a retired chairman or any other member or
retired member of the Union Public Service Commission, shall be exempt.

Section 10(47) – Exemption of Income of notified ‘Infrastructure debt fund’

It shall be exempt from income tax, when the fund is set up as per prescribed guidelines
and the notifications are issued by the government in this regard.

Section 10(49) – Exemption of income of National Financial Holdings Company

Any income of the National Financial Holdings Company, being a company set up by the
Central Government, shall be exempt.

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Deductions to be made in computing total income (Section 80A)
(1) In computing the total income of an assessee, there shall be allowed from his gross
total income, in accordance with and subject to the provisions of this Chapter, the
deductions specified in sections 80C to 80U.
(2) The aggregate amount of the deductions under this Chapter shall not, in any case,
exceed the gross total income of the assessee.

1. Section 80C Deductions on Investments

You can claim a deduction of Rs 1.5 lakh your total income under section 80C. In simple
terms, you can reduce up to Rs 1,50,000 from your total taxable income, and it is available
for individuals and HUFs.
Filing your Income Tax Return. The Income Tax Department will refund the excess
money to your bank account.

2. Section 80CCC – Insurance Premium

Deduction for Premium Paid for Annuity Plan of LIC or Other Insurer
Section 80CCC provides a deduction to an individual for any amount paid or deposited in
any annuity plan of LIC or any other insurer. The plan must be for receiving a pension
from a fund referred to in Section 10(23AAB). Pension received from the annuity or
amount received upon surrender of the annuity, including interest or bonus accrued on the
annuity, is taxable in the year of receipt.

3. Section 80CCD – Pension Contribution

Deduction for Contribution to Pension Account
A. Employee’s contribution under Section 80CCD (1)
You can claim this if you deposit in your pension account. Maximum deduction you can
avail is 10% of salary (in case the taxpayer is an employee) or 20% of gross total income
(in case the taxpayer being self-employed) or Rs 1.5 lakh – whichever is less.
Until FY 2016-17, maximum deduction allowed was 10% of gross total income for self-
employed individuals.
B. Deduction for self-contribution to NPS – section 80CCD (1B)
A new section 80CCD (1B) has been introduced for an additional deduction of up to Rs
50,000 for the amount deposited by a taxpayer to their NPS account. Contributions to Atal
Pension Yojana are also eligible.
C. Employer’s contribution to NPS – Section 80CCD (2)

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Claim additional deduction on your contribution to employee’s pension account for up to
10% of your salary. There is no monetary ceiling on this deduction.
Know more about Section 80CCD

4. Section 80 TTA – Interest on Savings Account

Deduction from Gross Total Income for Interest on Savings Bank Account
If you are an individual or an HUF, you may claim a deduction of maximum Rs 10,000
against interest income from your savings account with a bank, co-operative society, or
post office. Do include the interest from savings bank account in other income.
Section 80TTA deduction is not available on interest income from fixed deposits,
recurring deposits, or interest income from corporate bonds.

5. Section 80GG – House Rent Paid

Deduction for House Rent Paid Where HRA is not received
a. Section 80GG deduction is available for rent paid when HRA is not received. The
taxpayer, spouse or minor child should not own residential accommodation at the place of
employment
b. The taxpayer should not have self-occupied residential property in any other place
c. The taxpayer must be living on rent and paying rent
d. The deduction is available to all individuals
Deduction available is the least of the following:
a. Rent paid minus 10% of adjusted total income
b. Rs 5,000/- per month
c. 25% of adjusted total income*
*Adjusted Gross Total Income is arrived at after adjusting the Gross Total Income for
certain deductions, exempt income, long-term capital gains and income related to non-
residents and foreign companies.
An online e-filing software like that of Clear Tax can be extremely easy as the limits are
auto-calculated. So, you do not have to worry about making complex calculations.
From FY 2016-17 available deduction has been raised to Rs 5,000 a month from Rs 2,000
per month.

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6. Section 80E – Interest on Education Loan
Deduction for Interest on Education Loan for Higher Studies
A deduction is allowed to an individual for interest on loans taken for pursuing higher
education. This loan may have been taken for the taxpayer, spouse or children or for a
student for whom the taxpayer is a legal guardian.
80E deduction is available for a maximum of 8 years (beginning the year in which the
interest starts getting repaid) or till the entire interest is repaid, whichever is earlier. There
is no restriction on the amount that can be claimed.

7. Section 80EE – Interest on Home Loan

Deductions on Home Loan Interest for First Time Home Owners
FY 2017-18 and FY 2016-17 this deduction is available in FY 2017-18 if the loan has
been taken in FY 2016-17. The deduction under section 80EE is available only to home-
owners (individuals) having only one house property on the date of sanction of the loan.
The value of the property must be less than Rs 50 lakh and the home loan must be less
than Rs 35 lakh. The loan taken from a financial institution must have been sanctioned
between 1 April 2016 and 31 March 2017. There is an additional deduction of Rs
50,000 available on your home loan interest on top of deduction of Rs 2 lakh (on
interest component of home loan EMI) allowed under section 24.
FY 2013-14 and FY 2014-15 during these financial years, the deduction available under
this section was first-time house worth Rs 40 lakh or less. You can avail this only when
your loan amount during this period is Rs 25 lakh or less. The loan must be sanctioned
between 1 April 2013 and 31 March 2014. The aggregate deduction allowed under this
section cannot exceed Rs 1 lakh and is allowed for FY 2013-14 and FY 2014-15.

8. Section 80CCG – RGESS

Rajiv Gandhi Equity Saving Scheme (RGESS)
The deduction under this section 80CCG is available to a resident individual, whose gross
total income is less than Rs.12 lakh. To avail the benefits under this section the following
conditions should be met:
a. The assessee should be a new retail investor as per the requirement specified under the
notified scheme.
b. The investment should be made in such listed investor as per the requirement specified
under the notified scheme.
c. The minimum lock in period in respect of such investment is three years from the date
of acquisition in accordance with the notified scheme.

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Upon fulfillment of the above conditions, a deduction, which is lower of the following is
allowed.
50% of the amount invested in equity shares; or
Rs 25,000 for three consecutive Assessment Years.
Rajiv Gandhi Equity Scheme has been discontinued starting from 1 April 2017. Therefore,
no deduction under section 80CCG will be allowed from FY 2017-18. However, if you
have invested in the RGESS scheme in FY 2016-17, then you can claim deduction under
Section 80CCG until FY 2018-19.

9. Section 80D – Medical Insurance

Deduction for the premium paid for Medical Insurance
You (as an individual or HUF) can claim a deduction of Rs.25,000 under section 80D on
insurance for self, spouse and dependent children. An additional deduction for insurance
of parents is available up to Rs 25,000, if they are less than 60 years of age. If the parents
are aged above 60, the deduction amount is Rs 50,000, which has been increased in
Budget 2018 from Rs 30,000.
In case, both taxpayer and parent(s) are 60 years or above, the maximum deduction
available under this section is up to Rs.1 lakh.
Example: Rohan’s age is 65 and his father’s age is 90. In this case, the maximum
deduction Rohan can claim under section 80D is Rs. 100,000. From FY 2015-16 a
cumulative additional deduction of Rs. 5,000 is allowed for preventive health check.

10. Section 80DD – Disabled Dependent

Deduction for Rehabilitation of Handicapped Dependent Relative
Section 80DD deduction is available to a resident individual or a HUF and is available on:
a. Expenditure incurred on medical treatment (including nursing), training and
rehabilitation of handicapped dependent relative
b. Payment or deposit to specified scheme for maintenance of handicapped dependent
relative.
i. Where disability is 40% or more but less than 80% – fixed deduction of Rs 75,000.
ii. Where there is severe disability (disability is 80% or more) – fixed deduction of Rs
1,25,000.
To claim this deduction a certificate of disability is required from prescribed medical
authority. From FY 2015-16 – The deduction limit of Rs 50,000 has been raised to Rs
75,000 and Rs 1,00,000 has been raised to Rs 1,25,000.

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11. Section 80DDB – Medical Expenditure
Deduction for Medical Expenditure on Self or Dependent Relative
A. For individuals and HUFs below age 60
A deduction up to Rs.40,000 is available to a resident individual or a HUF. It is available
with respect to any expense incurred towards treatment of specified medical diseases or
ailments for himself or any of his dependents. For an HUF, such a deduction is available
with respect to medical expenses incurred towards these prescribed ailments for any of the
HUF members.
B. For senior citizens and super senior citizens
In case the individual on behalf of whom such expenses are incurred is a senior citizen, the
individual or HUF taxpayer can claim a deduction up to Rs 1 lakh. Until FY 2017-18, the
deduction that could be claimed for a senior citizen and a super senior citizen was Rs
60,000 and Rs 80,000 respectively. This has now become a common deduction available
up to Rs 1 lakh for all senior citizens (including super senior citizens) unlike earlier.
C. For reimbursement claims
Any reimbursement of medical expenses by an insurer or employer shall be reduced from
the quantum of deduction the taxpayer can claim under this section.
Also remember that you need to get a prescription for such medical treatment from the
concerned specialist in order to claim such deduction. Read our detailed article on Section
80DDB.

12. Section 80U – Physical Disability

Deduction for Person suffering from Physical Disability
A deduction of Rs.75,000 is available to a resident individual who suffers from a physical
disability (including blindness) or mental retardation. In case of severe disability, one can
claim a deduction of Rs 1,25,000.
From FY 2015-16 – Section 80U deduction limit of Rs 50,000 has been raised to Rs
75,000 and Rs 1,00,000 has been raised to Rs 1,25,000.

13. Section 80G – Donations

Deduction for donations towards Social Causes
The various donations specified in u/s 80G are eligible for deduction up to either 100% or
50% with or without restriction. From FY 2017-18 any donations made in cash exceeding
Rs 2,000 will not be allowed as deduction. The donations above Rs 2000 should be made
in any mode other than cash to qualify for 80G deduction.

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A. Donations with 100% deduction without any qualifying limit
 National Defense Fund set up by the Central Government
 Prime Minister’s National Relief Fund
 National Foundation for Communal Harmony
 An approved university/educational institution of National eminence
 Zila Saksharta Samiti constituted in any district under the chairmanship of the
Collector of that district
 Fund set up by a State Government for the medical relief to the poor
 National Illness Assistance Fund
 National Blood Transfusion Council or to any State Blood Transfusion Council
 National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental
Retardation and Multiple Disabilities
 National Sports Fund
 National Cultural Fund
 Fund for Technology Development and Application
 National Children’s Fund
 Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to
any State or Union Territory
 The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air
Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief
Fund, 1996
 The Maharashtra Chief Minister’s Relief Fund during October 1, 1993 and October
6,1993
 Chief Minister’s Earthquake Relief Fund, Maharashtra
 Any fund set up by the State Government of Gujarat exclusively for providing
relief to the victims of earthquake in Gujarat
 Any trust, institution or fund to which Section 80G(5C) applies for providing relief
to the victims of earthquake in Gujarat (contribution made during January 26, 2001
and September 30, 2001) or
 Prime Minister’s Armenia Earthquake Relief Fund
 Africa (Public Contributions — India) Fund
 Swachh Bharat Kosh (applicable from financial year 2014-15)
 Clean Ganga Fund (applicable from financial year 2014-15)
 National Fund for Control of Drug Abuse (applicable from financial year 2015-16)
B. Donations with 50% deduction without any qualifying limit
 Jawaharlal Nehru Memorial Fund
 Prime Minister’s Drought Relief Fund
 Indira Gandhi Memorial Trust

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  The Rajiv Gandhi Foundation
C. Donations to the following are eligible for 100% deduction subject to 10% of
adjusted gross total income.
 Government or any approved local authority, institution or association to be
utilized for the purpose of promoting family planning
 Donation by a Company to the Indian Olympic Association or to any other notified
association or institution established in India for the development of infrastructure
for sports and games in India or the sponsorship of sports and games in India

D. Donations to the following are eligible for 50% deduction subject to 10% of
adjusted gross total income
 Any other fund or any institution which satisfies conditions mentioned in Section
80G(5)
 Government or any local authority to be utilized for any charitable purpose other
than the purpose of promoting family planning
 Any authority constituted in India for the purpose of dealing with and satisfying
the need for housing accommodation or for the purpose of planning, development
or improvement of cities, towns, villages or both
 Any corporation referred in Section 10(26BB) for promoting the interest of
minority community
 For repairs or renovation of any notified temple, mosque, gurudwara, church or
other places.

14. Section 80GGB – Company Contribution

Deduction on contributions given by companies to Political Parties
Section 80GGB deduction is allowed to an Indian company for the amount contributed by
it to any political party or an electoral trust. Deduction is allowed for contribution done by
any way other than cash.

15. Section 80GGC – Contribution to Political Parties

Deduction on contributions given by any person to Political Parties
Deduction under section 80GGC is allowed to an individual taxpayer for any amount
contributed to a political party or an electoral trust. It is not available for companies, local

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authorities and an artificial juridical person wholly or partly funded by the government.
You can avail this deduction only if you pay by any way other than cash.

16. Section 80RRB – Royalty of a Patent

Deduction with respect to any Income by way of Royalty of a Patent
80RRB Deduction for any income by way of royalty for a patent, registered on or after 1
April 2003 under the Patents Act 1970, shall be available for up to Rs.3 lakh or the income
received, whichever is less. The taxpayer must be an individual patentee and an Indian
resident. The taxpayer must furnish a certificate in the prescribed form duly signed by the
prescribed authority.

17. Section 80 TTB – Interest Income

Deduction of Interest on Deposits for Senior Citizens
A new section 80TTB has been inserted vide Budget 2018 in which deductions with
respect to interest income from deposits held by senior citizens will be allowed. The limit
for this deduction is Rs.50, 000.
No further deduction under section 80TTA shall be allowed. In addition to section 80
TTB, section 194A of the Act will also be amended so as to increase the threshold limit
for TDS on interest income payable to senior citizens. The earlier limit was Rs 10,000,
which was increased to Rs 50,000 as per the latest Budget.

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Deductions-Summary
Section 80 Deduction Table
Section Deduction on Allowed Limit (maximum) FY
2018-19
80C Investment in PPF Rs. 1,50,000
– Employee’s share of PF contribution
– NSCs
– Life Insurance Premium payment
– Children’s Tuition Fee
– Principal Repayment of home loan
– Investment in Sukanya Samridhi Account
– ULIPS
– ELSS
– Sum paid to purchase deferred annuity
– Five year deposit scheme
– Senior Citizens savings scheme
– Subscription to notified
securities/notified deposits scheme
– Contribution to notified Pension Fund set
up by Mutual Fund or UTI.
– Subscription to Home Loan Account
scheme of the National Housing Bank
– Subscription to deposit scheme of a
public sector or company engaged in
providing housing finance
– Contribution to notified annuity Plan of
LIC
– Subscription to equity shares/ debentures
of an approved eligible issue
– Subscription to notified bonds of
NABARD
80CCC For amount deposited in annuity plan of -
LIC or any other insurer for a pension from
a fund referred to in Section 10(23AAB)
80CCD(1) Employee’s contribution to NPS account -
(maximum up to Rs 1,50,000)
80CCD(2) Employer’s contribution to NPS account Maximum up to 10% of salary
80CCD(1B Additional contribution to NPS Rs. 50,000
)
80TTA(1) Interest Income from Savings account Maximum up to 10,000
80TTB Exemption of interest from banks, post Maximum up to 50,000
office, etc. Applicable only to senior

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Section Deduction on Allowed Limit (maximum) FY
2018-19
citizens
80GG For rent paid when HRA is not received Least of :
from employer – Rent paid minus 10% of total
income
– Rs. 5000/- per month
– 25% of total income
80E Interest on education loan Interest paid for a period of 8
years
80EE Interest on home loan for first time home Rs 50,000
owners
80CCG Rajiv Gandhi Equity Scheme for Lower of
investments in Equities – 50% of amount invested in
equity shares; or
– Rs 25,000
80D Medical Insurance – Self, spouse, children – Rs. 25,000
Medical Insurance – Parents more than 60 – Rs. 50,000
years old or (from FY 2015-16) uninsured
parents more than 80 years old
80DD Medical treatment for handicapped – Rs. 75,000
dependent or payment to specified scheme – Rs. 1,25,000
for maintenance of handicapped dependent
– Disability is 40% or more but less than
80%
– Disability is 80% or more
80DDB Medical Expenditure on Self or Dependent – Lower of Rs 40,000 or the
Relative for diseases specified in Rule amount actually paid
11DD – Lower of Rs 1,00,000 or the
– For less than 60 years old amount actually paid
– For more than 60 years old
80U Self-suffering from disability: – Rs. 75,000
– An individual suffering from a physical – Rs. 1,25,000
disability (including blindness) or mental
retardation.
– An individual suffering from severe
disability
80GGB Contribution by companies to political Amount contributed (not
parties allowed if paid in cash)
80GGC Contribution by individuals to political Amount contributed (not
parties allowed if paid in cash)
80RRB Deductions on Income by way of Royalty Lower of Rs 3,00,000 or income
of a Patent received

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How to Register Yourself in Income Tax Site to File the ITR
Follow the Steps:
Step 1: Go to the Income Tax site “https://www.incometaxindiaefiling.gov.in/home” &
Click on the Register Yourself Button.

Step 2: Once you click the said Button the income tax site will direct you on the next
page.
Select User Type from the dropdown list.

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Step 3: Once you select the desire type then the site will direct you on the related next
page as below.
Fill the PAN Details & other necessary information.

Here you have require to fill your basic information.

Step 4: Once you complete the Step 3 the site will asked to confirm provided Mobile No.
& E-Mail ID through the pop-up window.

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Step 5: Once you confirm the provided communication details, the site will generate the
OTP’s & direct you on the next page to fill the both OTP’s.

Step 6: After the Validation of the OTP’s, the registration will be complete.

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Here you have to remember your Username (by default provided PAN) & Password to
login to file Income Tax Return. Otherwise you have to reset the Password.

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How to File Income Tax Return in Income Tax Portal
Follow the Steps:

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Step 1: Click in the Login Here button on this website
“https://www.incometaxindiaefiling.gov.in/home”

Step 2 Now go to profile setting then click on link Aadhaar from the dropdown and link
Aadhaar with PAN.

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Step 3 After Aadhaar linking, Pre-validate your Bank account (which is Compulsory in
case of Refund).

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Step 4 Again come on the “Dashboard” and click on “Filing of Income Tax Return” for
the next Procedure.
After this fill the required fields carefully on the income tax E-filing Tab which will
appeared as follows

Step 5 Click on continue and fill the amounts in relevant table/column.

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Step 6 Confirm the amounts which were filled by you.
After confirmation, click on “Preview & Submit” button.

Step 7 Once you click on preview & submit button, the portal may ask you to verify that
all details are correct or valid on a pop-up screen.

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Step 8 Once you confirm the details, the portal will direct you to preview page to
reconfirm whether any discrepancy has happened.
If yes click on the edit Button & change/correct the same. Otherwise click on submit.

Step 9 Once you click on submit button then the portal will ask to opt for the verification
option. Select any one option

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Step 10 Once you input the OTP, then the portal will reflect the following screen.

Step 11 After above step, go to - Dashboard – View Returns/Forms – Select Income tax
return from the drop down – Submit. The portal direct you to following screen.

Download your IT return and save the same.

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 Review of Literature
Indian Taxation Enquiry Committee (1924) was appointed by Government of India to
examine the burden of taxation on different classes of people, equity of taxation and to
suggest alternative sources of taxation under the chairmanship of Charles Todhunter. The
committee recommended the following measures for improvement in taxation of income:
• Loss sustained in one year should be allowed to carry forward and set-off in the
subsequent year.
• The income of married couples should be taxed at the rates applicable to their
aggregate income.
• In case private companies are formed just for tax avoidance by withholding
dividends, then such companies should be treated as firm.
• The officer should be authorized to compute liabilities of unregistered firm as if it
had been registered in some particular cases if he thinks it reasonable.
• Taxation Enquiry Commission (TEC) (1953-54) headed by
Direct Taxes Enquiry Committee (1971) was appointed by government of India under
the chairmanship of Justice K.N. Wanchoo to recommend measures for unearthing black
money, checking tax evasion and reducing tax arrears. The committee estimated that
unreported income during 1968-69 was Rs. 1400 crore which resulted in tax evasion
amounting to Rs. 470 crore. The committee was of the opinion that high tax rates, controls
and licenses in the economy, donations to political parties, ineffective enforcement of laws
and deterioration in moral standards were the main causes responsible for tax evasion. It
was also observed that tax arrears were a chronic problem with the income tax department.
Unrealistic and over assessment of income, administrative delays, shortage of personnel
and lack of coordination were identified as main causes responsible for tax arrears. The
measures suggested for dealing with above problems by the committee were as follows:
• Reduction in tax rates with maximum marginal rate of 75 per cent.
• Minimization of controls and licenses.
• Regulation of donations to political
• Parties. Creating confidence among small tax payers. Introducing extensive system
of intelligence.
• Issuing Permanent Account Numbers to all assesses.
Prescribing a uniform accounting year for all taxpayers coinciding with budget year.
Providing more administrative powers for search and seizure operations. Empowering the
union government to impose tax on agriculture by amending constitution. Creating
provision in law for settlement with taxpayers at any stage of the proceedings.
Compulsory registration for charitable and religious trusts which want to claim
exemptions under Income Tax Act. Collection and recovery units to be provided sufficient
manpower corresponding to number of assessing officers. Field staff in recovery units to
be given sufficient training and infrastructure. Recovery staff to be provided with firearms.
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Amendment in law to create an automatic lien on moveable and immovable properties of
the taxpayers.
Direct Tax Laws Committee (1978) was appointed by the Government of India on June
25, 1977 under the chairmanship of N.A. Palkhiwala. Later on C.C. Choksi took over the
Chairmanship as Palkhiwala had to leave. The committee (also known as Choksi
Committee) was directed to recommend measures for simplifying and rationalizing the
direct tax laws and improvement in administration. Committee observed that frequent
amendments in tax laws led to uncertainty and confusion among tax payers and tax
collectors. The committee made following suggestion in its final report:
• A uniform central law governing registration of trust, regulating their fund raising
activities, maintenance of accounts, application of income and investment of trust
funds should been acted.
• Depreciation should be allowed at the rate of 10 per cent on buildings, 20 per cent
on furniture and 30 per cent on plant and machinery.
• Law should be amended to provide that every taxpayer liable to pay advance tax
should furnish an estimate of advance tax payable by him on
• The basis of last assessment and pay the same in three equal instalments. The system
of issuing advance tax notices should be discontinued.
• The various provisions relating to computation of income under the head salary and
deductions should be grouped together in the sections dealing with computation of
income under the head salary.
• Income under the head ―Interest on Securities‖ should be assessed either under the
head ―Profits and Gains of Business or Profession‖ or under the head ―Income
from Other Sources‖.
• Where income from house property in received by a person other than the legal
owner then he alone should be assessed and no concurrent assessment should be
made on the legal owner.
• Towards administration the recommendations were:
The existing cadre of Assistant Commissioners should be redesignated as Deputy
Commissioners.
Income tax officers, Class I, in the senior scale, should be designated as Assistant
Commissioners.
Income tax Officer’s charges should be classified into senior scale charges and other
charges. The senior scale charges should be held by the newly designated Assistant
Commissioners who might be empowered to perform all the functions and exercise all the
powers of the assessing authority.

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 • Appeals against assessment orders should be to the Commissioner (Appeals). The
Deputy Commissioners should be deployed exclusively on supervising, guiding and
directing the work of assessing officers.
• A new cadre known as Regional Commissioners should be created. The Regional
Commissioners should have the status of additional secretary to the Government of
India.
• A new cadre known as Regional Commissioners should be created. The Regional
Commissioners should have the status of additional secretary to the Government of
India.
1. The Chairman of the Central Board of Direct Taxes should be given the status of a
Secretary to the Government of India.
2. Manpower should be adequately augmented and the officers should be provided
with adequate office space, storage space and equipment’s.
3. The amendment to the Income tax rules should be made only once a year
preferably in July and it should be notified by September so as to operate from the
first of April of the following year.
Economic Administrative Reforms Commission (1983) was constituted by Government
of India to review income tax law, procedure and organization of the income tax
department in 1981 under the chairmanship of L. K. Jha. Some important
recommendations made by the commission were as follows:
1. The employers should be permitted to deduct from the salary payable, tax on the
employees incomes from sources like house property, interest on deposits etc., if the
employees made a specific request to the employer and furnished necessary
particulars.
2. Levy of penalties for defaults like failure to furnish estimates of advance tax, delay in
payment of tax, delay in filing return of income or payment of self-assessment tax
should be replaced by compensatory interest at a deterrent rate.
3. No tax should be deducted from dividends paid through crossed account payee
cheques by listed companies to non-corporate taxpayers.
4. A suitable system should be devised under which the work of monitoring and
checking of deduction of tax at source should be centralized and computerized. For
this purpose, an appropriate identification code for persons (i.e. payers) liable to
deduct tax at source should be developed.
5. The provisions relating to payment of advance tax should be modified laying down a
uniform procedure for all assesses.
6. Penalty for concealment should be levied in cases of proven concealment only.
7. All returns filed by tax payers should be accepted on receipt and thereafter only as
many returns should be taken up for scrutiny in a year as the Department’s resources
would permit. The criteria for the selection of cases for scrutiny should remain secret
and the selection should be made not by I.T.O. but at a higher level.

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8. All first appeals should be entrusted to Commissioner (Appeals).
9. Steps should be taken for introducing computerization on a limited scale, such as
checking of TDS returns, compilations of statistics, etc. and later on it should be
extended to the areas of assessment, tax accounting and investigation.

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 Data Analysis using Questionnaires
These questions are answered by 43 peoples through an online survey
link
https://docs.google.com/forms/d/e/1FAIpQLScqyS2GUVcx0shLPgwvmym
00BFpEZErUu5SNS9Yf3cKHU-Pdw/viewform?usp=sf_link

Q 1 What is Your Occupation?

Options Response (%)

Service 54
Student 30
Businessman 10
Other 6

Response

6%
10%
Service
Student
54% Businessman
30% Other

ANALYSIS

According to the survey I have found that the 54 percent participant’s occupation is
Service. And rest of them are Students, Businessmen, etc. They are more aware of Income
Tax Return and they are searching for more and more information about Income Tax
return of an individual. These participants are told that to provide details about their
occupations and whether they tax payers are not.

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Q 2 Are you regular tax payer?

Options Response (%)

Yes 52
No 48

Response

Yes
48%
52% No

ANALYSIS

According to the survey I have found that the 52 percent participants are tax payer and 48
percent of the participants are still not eligible to pay tax or not paying taxes to the
government under the Income Tax Act. The tax payer participant are mostly servicemen in
the survey.

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Q 3 Under which Head of income your income becomes Taxable?
Options Response (%)
Income from Salary 54
Income from House Property 17
Income from Business & Profession 14
Income from Capital Gain 6
Income from Other Sources 9

Response

9%
6%
Income from Salary
Income from House Property
14%
Income from Business & Profession
55% Income from Capital Gain
Income from Other Sources
17%

ANALYSIS

According to the survey I have found that the 54 percent participant’s taxable income
comes under the head of salary only. 17 percent of the participant’s taxable income comes
under the head of house property and as above details given in the table .The tax payer
participant are mostly servicemen in the survey and are also taxable for income from
salary after deducting their allowances.

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Q 4 What is your Income Range?

Options Response (%)

Less than 3 Lakh 54
3 Lakh to 5 Lakh 20
5 Lakh to 10 Lakh 16
More than 10 Lakh 10

Response

10%

16% Less than 3 Lakh

3 Lakh to 5 Lakh
54% 5 Lakh to 10 Lakh
More than 10 Lakh

20%

ANALYSIS

According to the survey I have found that the 54 percent participants have salary range
less than 3 lakh taxable which may can be servicemen or part timers. 20 percent of the
participants have salary range between 3lakh to 5 lakh they may be at a post of high level
or may be businessmen at smaller markets. And rest of them maybe businessmen or
investors.

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Q 5 Does your tax consultant timely notify you the various provisions
and submissions of all taxes?

Options Response (%)

Yes 44
No 56

Response

Yes
44%
No
56%

ANALYSIS

According to the survey I have found that the 44 percent participant’s tax consultant
timely notify them about the various provisions and submissions of all taxes. Rest of them
may not be eligible or may not being able to get in the touch with their tax consultant to
get the information about various provisions and submissions of tax. As according to the
survey most of them are part timers so their salaries income may not be eligible for
submission of tax.

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Q 6 Whether your tax consultant reminds you regarding Tax
Obligations?

Options Response (%)

Yes 56

No 44

Response

44% Yes
No
56%

ANALYSIS

According to the survey I have found that the 56 percent participant’s tax consultant
timely notify them about tax consultant reminds those regarding Tax Obligations. Rest of
them may not be eligible or may not being able to get in the touch with their tax consultant
to get the information about various tax obligations. As according to the survey most of
them are part timers so their salaries income may not be eligible for facing tax obligations.

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69 | P a g e
Q 7 How do you get the information about taxation?

Options Response (%)

Through tax consultant 38

Through Friends and Relative 36

Other (Journals, Magazines, Books, televisions, etc.) 26

Response

26%
38% Throught taxconsutant
Throught friends and Relative
Other ( Journals , Magazines , Books ,
televisionsetc.)

36%

ANALYSIS

According to the survey I have found that the 38 percent participant’s get information of
taxation through tax consultant and 36 percent of participants get to know about taxations
through friends and relatives. Most of them get the information about taxation though
electronic medium and newspapers, journals. As according to the survey most of them are
having the possibility of getting penalty on late return filing of their income.

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Q 8 What is your impression about the fees charged by your tax
consultant?

Options Response (%)

Higher 32
Lowest 30

Reasonable 38

Response

32%
38% Higher
Lowest
Reasonable

30%

ANALYSIS

According to the survey I have found that the 38 percent participant’s tax consultants
charge reasonable fees for tax consultancy as the participants may having less income they
may have been consulted to small consultancy office. 32 participants pay higher fees for
tax consultancy as the tax consultant timely notify them about various provisions and
submissions of all taxes and also reminds them regarding Tax Obligations. Small traders
or businessmen chooses cheap tax consultancies for cost cutting in the expenses on
provision and taxations.

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Q 9 Do you discuss Government‘s Annual Budget provisions with your
tax consultant beforehand?

Options Response (%)

Yes 64
No 36

Response

36%
Yes
No
64%

ANALYSIS

According to the survey I have found that the 64 percent participants discuss
Government‘s Annual Budget provisions with their tax consultant beforehand so the tax
consultant can timely notify them about new rules related to the government’s annual
budget. Rest of them may not be eligible or may not being able to get in the touch with
their tax consultant to discuss Government‘s Annual Budget provisions and get the
information about various tax obligations.

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Q 10 Does your tax consultant discuss the financial matters of someone
else with you?

Options Response (%)

Yes 22
No 72
Sometimes 6

Response

6%
22%

Yes
No
Sometimes

72%

ANALYSIS

According to the survey I have found that the 72 percent participant’s tax consultant not
discuss the financial matters of someone else with them they may be mostly of higher paid
tax consultancy offices. As the tax consultant may have very highly data of their assesses,
the data may contain information regarding their annual tender budget or etc. some of the
tax consultant discus the financial matters with their clients for advising them what to do
and what not to do.

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Q 11 Are you sure that your tax consultant keeps all the information
regarding your income tax matter confidential?

Options Response (%)

Yes 22

No 62

Sometimes 16

Response

16% 22%

Yes
No
Sometimes

62%

ANALYSIS

According to the survey I have found that the only 22 percent participant’s tax consultant
keeps all the information regarding their income tax matter confidential and not discuss
their financial matters with someone else as they are highly paid so that is their
responsibilities to keep their data confidential. Many of the participant are of salaried
persons so they can’t afford higher tax consultants in their cases there a chance of leaking
of information regarding their income tax matter which are very confidential for tax payer.

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Q 12 Are you satisfied with the services provided by your tax consultant?

Options Response (%)

Fully-satisfied 52

Partly-satisfied 28

Not-satisfied 20

Response

20%

Fully-satisfied
Partly-satisfied
52%
Not-satisfied

28%

ANALYSIS

According to the survey I have found that the only 52 percent of participants are fully-
satisfied with their services provide by their tax consultant as that are of because of their
salary criteria and the ability to afford the tax consultant according to their needs. Many
of the participant’s tax consultants does not provide proper services as they may are less
professional in the works or maybe lacking with the secrecy of the confidential
information.

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 CONCLUSIONS AND SUGGESTIONS

Previous researchers have highlighted the importance of perceived risk to the adoption of
E-filing. There are many benefits of E-filing. Various researchers have different opinion
regarding the benefits of E-filing; however according to some researchers many challenges
are there regarding adoption of E-filing by mass population. Main challenge is risk of
security. The three main aspects of security include: confidentiality, integrity and
availability. Confidentiality is keeping information from being seen or used by anyone
who should not have permission to see or use it. Integrity is ensuring that data has not
been altered or tampered with in any way by anyone. Availability is ensuring that the data
is accessible at all times to those who have permission to access it. Also, technology
readiness can be used to predict and explain people’s responses towards new technologies.
Hence main importance should be given to security of private data of customers, so that
more and more people e-file their ITRs

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 References
Wikipedia Content
"DYK: Last date to file a belated income-tax return for FY14 is 31 july2017"
(http://www.livemint.com/Money/XjshoLJGkLRCd9GNvIODeO/DYK-Last-date-to-file-
a-belated-incometax-return-for-FY14.html), Live Mint, 27 February 2016
"INDIAN INCOME TAX RETURN"
(http://www.incometaxindia.gov.in/archive/ITREnglish_2009-10/Form%20ITR-3.pdf)
(PDF). Government of India – Income Tax Dept.
https://www.business-standard.com/article/pti-stories/govt-extends-due-date-for-filing-itr-
for-2018-19-by-a-month-till-aug-31-119072301352_1.html
"Instruction of SAHAJ Income Tax Return"
(http://law.incometaxindia.gov.in/DITTaxmann/IncomeTaxRules/PDF/Ay2011-12/
sahaj_instructions_2011.pdf) (PDF). Government of India – Income Tax Dept. Retrieved
29 October 2012.
"Tips on filing I-T returns" (http://www.dnaindia.com/bangalore/report_tips-on-filing-i-t-
returns_1719361). DNA India. 25 July 2012. Retrieved 3 November 2012.
"FORM ITR-2 for assessment year 2011–2012"
(http://www.india.gov.in/images/banner/linktousbanner/itr/ITR-2.pdf) (PDF). Government
of India, Income Tax Dept. Retrieved 26 November 2012.
"Overseas Assets under Lens" (http://businesstoday.intoday.in/story/income-tax-returns-
budget-2012-13-changes-rules-e-return/1/24257.html). Business Today. Retrieved 26
November 2012.
"INDIAN INCOME TAX RETURN"
(http://law.incometaxindia.gov.in/DITTaxmann/IncomeTaxRules/PDF/Ay-2012-2013/
FormITR3ENG.pdf) (PDF). Government of India –Income Tax Dept. Retrieved 20
November 2012.

Income Tax Department

https://www.incometaxindia.gov.in/pages/acts/income-tax-act.aspx
Clear Tax Website
https://cleartax.in/s/80c-80-deductions
External Links

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Retrieved from https://en.wikipedia.org/w/index.php?
title=Income_tax_return_(India)&oldid=913496736
Steps Income tax department
https://www.incometaxindia.gov.in/Pages/tax-services/file-income-tax-return.aspx

Steps Paisabajar
https://www.paisabazaar.com/tax/income-tax-return/

Exempt list
https://www.hrblock.in/guides/section-10-exemptions

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