Using a service provider to file returns: Expert answers taxation questions

In assessment year (AY) 2019-20 I have made long-term capital gain (LTCG) of about Rs 5,000 from the sale of listed shares where securities transaction tax (STT) was paid. As this is well below the threshold limit of Rs 1 lakh, I intend to show it as “exempt income” and submit ITR1. Or should I submit ITR-2?  The above item is the only one that necessitates switching from ITR-1 to ITR-2.
 

According to the notified return forms for tax year 2018-19, ITR 1 cannot be used by an individual who has income from any of the following sources: Profits and gains from business and professions, capital gains, income from more than one house property, and income from lottery winnings or owning and maintaining race horses. Since you have a capital gain of Rs 5,000, you need to file ITR 2 and fill in the details under the schedule “capital gains” of the return form. But since this amount is not taxable, you will have no tax liability thereafter. You have already provided the sale and purchase of transactions on which you made the gain, so there is no need to include it in the exempt income schedule. In fact, if you see the return form for 2018-19, the line item for showing such exempt capital gains has also been removed.

I plan to use a service provider to file my returns. If the executive makes a mistake, who will be held responsible? What are things I should check if I use an online service?

Your return, your responsibility. While you may not be a tax expert and may need a service provider to help you with this task, you will be held responsible if there is an error. The tax authorities will issue a notice to you. As for the responsibility of the service provider, it will depend on the terms and conditions of the agreement between the service provider and you. This is a commercial arrangement. But filing your tax return is your responsibility and you are accountable for it. Thanks to the technology which the tax authorities have implemented, this task has become much easier now. Below are some of the checks you should run before clicking on the ‘file’ button:

• Be a well-informed taxpayer. The return forms get notified every year. Hence, you should not take clue from the last return filed for choosing this year’s return form.
• Reconcile your Form 26AS with your return before filing. Include all incomes and taxes deducted therein in your filing.
• The return form also asks for a detailed break up of salary income like allowances, perquisites, etc. Make sure that you have your Form 16 with you and have filled in the required details correctly.
• If you have invested in the names of your minor children or spouse, clubbing provisions apply.
• Take care to report your exempt income, such as interest on PPF account, dividend from mutual funds, etc.
• If you are an ordinarily resident Indian, take care to accurately disclose overseas assets held by you during the year. This year’s return form has expanded the scope for this disclosure to include details of foreign custodian and depository accounts, equity gains, interest from debt, cash value insurance or annuity contract.
• If your income exceeds Rs 50 lakh, you will also be required to report assets and corresponding liabilities held by you at the end of the year under the schedule “AL”.
• Make sure you select the correct assessment year (AY) while filing the return. AY to be selected is 2019-20 and not 2018-19.
• Keep all supporting documents in a file so that you are able to handle any questioning later on by the tax department.
• If you use a consultant, make sure you provide complete and accurate information, and the supporting documents so that he is able to prepare your return diligently.
• Most importantly, file your return on time and keep visiting your online account regularly.

The writer is partner and leader, personal tax, PwC India. The views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in