Exemption from filing returns is voluntary

The finance ministry’s decision to exempt salaried people with taxable income up to Rs 5 lakh from filing returns has become a bane for some taxpayers. Though the ministry had clarified that it was not mandatory for taxpayers to avail of this privilege, some taxpayers willing to file returns despite being eligible for exemption have complained they were advised against doing so.

The issue has been forwarded to the ministry, which then issued instructions to tax officers to cooperate with taxpayers who wanted to file their returns. The matter came to light recently when some taxpayers told the Income Tax Department that they were being discouraged from filing returns and some income-tax commissioners told them that there was no need for them to file returns on the basis of a recent notification.

A senior finance ministry official said the tax officers might have advised the taxpayers not to file returns and if some officers had misunderstood the notification, it was being clarified to them that they could not stop taxpayers from filing their returns. The Central Board of Direct Taxes had notified the scheme exempting salaried taxpayers with taxable income up to Rs 5 lakh from filing income tax returns for assessment year 2011-12, which will be due on July 31, 2011. The scheme is expected to benefit over seven million taxpayers.

This means individuals having taxable income up to Rs 5 lakh for 2010-11 consisting of salary from a single employer and interest income from deposits in a savings bank account up to Rs 10,000 are not required to file their income-tax returns. House owners with no rental income and retail investors in the stock market who fulfil these criteria and had not booked profits in equities during the year are also exempted.

However, such individuals have to report their Permanent Account Number and the entire income from bank interest to their employers, pay the entire tax by way of deduction of tax at source, and obtain a certificate of tax deduction in Form 16.

Persons receiving salary from more than one employer, having income from sources other than salary and interest income from a savings bank account, or having refund claims are not covered under the scheme. It is also not applicable in cases where notices have been sent to taxpayers for scrutiny.