How are taxpayers preparing to file returns?

To complete this annual ritual by July 31, assessees have several options. It will help to keep abreast of the tweaks made every year

It’s that time of the year when the deadline to file income-tax returns is round the corner. Preparation for this annual ritual is going on in full swing among tax payers. How do they go about fulfilling this obligation annually? We spoke to a few young and middle-aged assesses to find out their plans and ideas.

Choosing different paths

Approaching the neighbourhood chartered accountant to help you meet your obligation towards the taxman has been the time-tested practice. Now, there are also tax return preparers (TRPs) and e-filing intermediaries. TRPs (www.trpscheme.com) are graduates in fields such as commerce/economics/statistics/law etc, and are chosen, trained and appointed by the government for the purpose of helping assessees prepare their tax returns.

For new assessees, remuneration payable to the TRP will be 3 per cent of the tax paid on the returns prepared and filed in the first year (subject to a maximum of ₹1,000); 2 per cent in the second year and 1 per cent in the third year. For old assessees, it will be ₹250. Another option could be to use the services of e-filing intermediary websites such as ClearTax, Taxsmile, Taxspanner, myITreturn, etc

While some offer basic self-filing of returns for free, many have different packages that not only assist you in filing returns but also provide other value-added services for a fee. The prices of these packages range anywhere from ₹250 to over ₹5,000 depending on the additional services provided.

Then, of course, there is always the do-it-yourself option. This is the choice that Chennai-based S Subhapratha wants to exercise this year. After taking a career break for a few years, she made a comeback last year, starting a mutual fund distribution business. “ Being the first time after some years, I am reading up to file my return on my own well ahead of the usual July 31 deadline”, she says.

Others such as Abhik Mukherjee, who works as Assistant Vice President with Barclays Technology Centre at Pune, prefers to hand it over to a chartered accountant for the final filing although he does some homework. “I maintain an excel sheet with incomes from various sources, investments and loans both for myself and my wife. I then send it over to my auditor for final advice”, he says.

Manjunath Sangappan, who is part of the Cloud Business Solutions division in an MNC IT company in Bengaluru, echoes a common concern when he says, “ Even if one is able to read-up and file return on his own, one is never sure whether he has done all that has to be done”. He has tried all options — self filing, filing through a tax advisor and though an online intermediary - at least once. He plans to use the services of a tax advisor this year due to paucity of time on his hands.

Keeping up to date

The issue with tax-return filing is that one needs to read-up and update on the latest developments each year. For example, in the tax filing season of 2017, ITR 1 was brought down to a single page from seven earlier, and ITR 2A was done away with. There have been tweaks this year too.

This year, the ITR 1 form can be used only by those who qualify as a resident in India as per the definition laid down in the Income Tax Act. In 2017; the ITR 2 form was modified in such a way that not only the salaried class but also partners of business firms could use it. This change has been done away with this year. Thus, for this year, ITR 2 has effectively been made applicable exclusively to the salaried class who are otherwise not eligible for ITR 1. This year, partners of a firm have to use ITR 3, along with those who run proprietary businesses.

More important, from this year, a late fee under Section 234 F will be charged for returns not filed within the due date specified (July 31, 2018, for incomes earned during 2017-18). If the return is submitted after the due date, but before December 31, 2018, a flat late fee of ₹5,000 will be payable. The late fee will double if filed after December 31.

Subhapratha has done the ground work this year and has figured that ITR 3 will be applicable for her this year. Earlier, when she was a salaried assessee, she used to file ITR 1. With a relative having had the experience of delayed filing after handing it over to an auditor, she does not want to take chances this year, since she is aware of the new penalty for late filing. Kiran K from Bengaluru, who works as an accountant with an audit firm, updates himself on and off by talking to his colleagues casually. “I aware that incomes and tax deductions shown in Form 16, Form 26AS and the return should match, to avoid any problems during assessment such as further demand for taxes”, he says.

Simpler the better

To a layman who may have tax liabilities, understanding the tax law or, for that matter, the changes/updates made each year to either the provisions or the return forms, is not easy. Hence, the return filing exercise is considered more of a headache and should be done as quickly as possible.

Manjunath, Abhik and Kiran point out that both the tax laws and return filing process can be further simplified. Says Manjunath, “For the salaried class, when we declare all our incomes and investments to our employers, the TDS (tax deduction at source) itself can care of our entire tax obligation in many cases. So we need not be asked to file returns once again separately. Since our PAN is captured in all our transactions, bringing out such a regime may not be difficult.”

Subhapratha has a point when she says, “ It may not be easy for the department to make returns very simple as our tax law itself is complex.”The Direct Taxes Code was originally introduced by the earlier UPA government in 2009 with this objective. But it still remains on paper. For now, assessees can only take solace from the fact that unlike in the past, their returns have been made annexure free and the filing exercise has become completely online since the last few years.

Returns applicable to individuals

ITR 1 - Salary, one house property, other sources ( only resident with income below Rs 50 lakh)

ITR 2 - Salaried assessees not eligible for ITR 1

ITR 3 - Sole proprietors and partners of a firm

ITR 4 - Presumptive income from business or profession

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