Those who have earned less than Rs 10,000 interest from savings accounts and have taxable income up to Rs 5 lakh will also not have to file returns for 2010-11.
The last date for filing returns is July 31, according to a Central Board of Direct Taxes (CBDT) notification issued today.
Experts, however, said the scheme was likely to continue next year, too. Sundeep Agarwal, associate director (tax), PricewaterhouseCoopers (PwC), said, “There could be some changes according to the Direct Taxes Code, but I expect the exemption to continue.”
The move, announced by Finance Minister Pranab Mukherjee in the Budget, is likely to benefit over five million taxpayers.
“Individuals must report their permanent account numbers and income from bank interest to their employers, pay tax by way of tax deducted at source and get a certificate of tax deduction (Form 16),” said CBDT.
But those with income from other sources such as fixed deposits and mutual funds will have to file returns.
Homi Mistry, partner, Deloitte Haskins & Sells, said, “If you have an income from shares, either through capital gains or dividend, or from units of mutual funds, you may not enjoy this benefit.”
Tax experts say the move in line with the global practice and will help the Income Tax Department focus on big taxpayers.
Experts said for those who qualify, the benefits could be much more.“Individuals with incomes in the range of Rs 6.5-8 lakh will qualify,” said Mistry.
Here’s how. Suppose you have an income of Rs 6.5 lakh. Let’s assume you invest Rs 1 lakh under Section 80C (Employees Provident Fund, Public Provident Fund, life insurance, five-year bank fixed deposits, equity-linked saving schemes), Section 80CCF (Rs 20,000 in infrastructure bonds) and Section 80D (Rs 15,000 towards health insurance for self and Rs 20,000 for parents). This will leave you with a taxable salary of Rs 4.95 lakh. If you have also taken a housing loan on which the interest paid is Rs 1.5 lakh or more, you will be exempted even if your total income is Rs 8 lakh. “This is a good move as Form 16 is considered a better representation of income. Even for home loans and visas, the authorities ask for Form 16 and not tax returns,” said PwC’s Agarwal. But tax experts say returns will have to be filed for claiming refunds. Also, people getting salary from more than one employer and having income from sources other than salary will not get the benefit. The scheme will also not apply in cases where notices have been issued for filing returns under Section 142(1) or Section 148 or Section 153A or Section 153C of the Income Tax Act 1961. “That is, if your returns have come up for scrutiny or your income has escaped assessment,” explains Mistry.
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Jaitley, however, cautioned things may go from bad to worse if the country gave a fractured mandate in the ensuing general elections