Tax menace: when saral turns confusing

Saral means simple. Perhaps, keeping this in mind, the Income-tax department had called its income-tax return form 'Saral' which sought to make the tax payer's life simple. Indeed, the existing Saral income-tax return form is tax-payer friendly which he can fill up with ease.

But that was till the last financial year. The 'Saral part II' or the new proposed format for filing income-tax returns is one of the most complicated piece of craftsmanship by the department. The new form is a very exhaustive four-page document and it is not going to be an easy affair for most tax payers to fill up.

The new Saral form is to be used by individual tax payers and Hindu Undivided Families. However, tax payers having business income, agricultural income or capital gains are not permitted to use this new return form. Likewise, if a person owns more than one house property, then also this new Saral form can't be used. Although persons having capital gains have been debarred from using this return form, the tax payers deriving long-term capital gains from transactions on which securities transaction tax had been paid can use this new Saral form.

The following are some of the important salient features of the new Saral form which can be kept in mind by the tax payers:

• This new Saral form is to be filled up for the Assessment Year 2006-07 only, that is, in respect of the financial year 2005-06.

• The tax payers have been advised not to enclose any statement with the said return form showing the computation of income. Likewise, TDS certificates, proof of tax payments, etc, are not to be enclosed.

• The new Schedule-5 has been attached to the form which talks about cash flow statement wherein the tax payers are required to give the details of cash and bank balances, including details of other receipts which are exempted from income-tax. Details of receipt in the form of loans and gifts taken or received during the year have to be mentioned in the return form.

• In the schedule of cash flow statement, there is an item in respect of which the tax payer is required to given details of other receipts, etc. In this column, even the details relating to maturity of insurance policies, return of loans etc., etc. has to be given.

• In the cash flow statement, which is part of the new income-tax return form, details have to be given in respect of outgoings during the year, including outgoing in the form of expenses, investments, etc, in respect of which deduction u/s 80C is claimed by the assessee. Similarly, the detail in respect of outgoing by way of other investments has also to be mentioned. There is one column which speaks about other outgoings. If one goes carefully through the instructions for filling up of the form Saral, one would find that in the column "other outgoings" the tax payers are required to furnish the details of all other outgoings, including outgoing for household expenses.

• The special feature of this proposed form Saral is that the details filled up in this return form and the schedules have to be first transmitted electronically without digital signature to the website of the Income-tax department. The date of such transmission as also the acknowledgement No. given to the tax payer electronically by the department for such transmission has to be filled up in the return form. Thus, it implies that firstly the return will be required to be submitted electronically and thereafter physical return has to be filed with the department.

• One of the columns in the new return form speaks about number of dependants. In this column, the tax payer -- if he is an individual -- is required to fill up the number of persons, including minors who are dependent on him.

• Only one copy of this form is required to be filled up. Thus, this form is not to be filled up in duplicate. A small acknowledgement slip attached with the form is also to be filled up. This acknowledgement will be deemed to be the intimation from the tax department.

• Detailed instructions for filling up new form Saral are attached with the form itself which will guide the tax payers to correctly fill up the return form. If, however, the tax payer has already filed the return in the existing Saral income-tax return form, then he will not be called upon to resubmit the return in the new form.

• The individual tax payer as also Hindu Undivided Families should carefully study the provisions of this proposed new Saral form. Please note that an incomplete return form is not treated as a valid income-tax return. Similarly, wrong submission of the particulars in the return form may entail penalty and consequential penal action.

The new income tax form, called form 2F, can be used by individuals, Hindu Undivided Families, who do not have profits and gains of business or profession, capital gains, agriculture income, more than one house property, any claim for relief under section 89 in respect of arrears or advance of salary.

However, tax payers have been given the option of filing tax returns for this year in the existing Saral form as well up to July 31, the last date for filing of returns.

The new form, Chandrasekhar said, introduces schedule 5 in which tax assessees would have to report cash flow for a fianncial year.

But this cash flow statement under schedule 5 is optional for this financial year. It would be mandatory from next year onwards.

Chandrasekhar said the main advantage of furnishing the cash-flow statement is that it would "substantially" reduce the probability of scrutiny assessment or any other kind of intrusive investigation on tax assessees.

Source http://www.indiancaonline.com