Income Tax Returns: FAQs And Key Aspects To Consider

As the due date for filing the income tax returns is round the corner and majority of the returns are expected to be filed in the last 8 to 10 days, given below are certain frequently asked questions and points to remember before filing your income tax returns:

Frequently Asked Questions

1. Can I file my income tax return completely based on information reported in my Taxpayer Information Summary?

Reply: No. You cannot simply rely on information reported in Taxpayer Information Summary as it may not contain all the relevant information.

Also, there is a disclaimer given in TIS statement which states:

TIS is purely assistive in nature and is made available to enable taxpayers accurately file their returns. It may not contain a complete list of financial transactions undertaken by taxpayers that are relevant for filing their tax returns.

2. Dividend income reported in Annual Information Statement/TIS is higher than that actual received by me in my bank account. Which income do I have to report in my income tax return?

Reply: Income reported in AIS is the gross amount of dividend earned i.e., it is inclusive of the tax deducted by the dividend paying company/mutual fund, whereas the amount received in your bank account would be net of tax deducted.

The amount of income to be reported in the income tax return is the gross amount of dividend as the tax deducted by dividend paying company/mutual fund is also part of the dividend income.

In case, even after considering the above, there continues to be a mismatch in the dividend amount, you may identify individual scrips in your TIS and mention your feedback with corrected amounts/remarks.

3. My only source of income is long-term capital gains on sale of shares of Rs 4 lakh (out of which 1 lakh is not chargeable to tax as per section 112A) and I also have Section 80C investments of Rs 1.50 lakh so effectively my income is only Rs 1.50 lakh. In that case, am I required to file my income tax return?

Reply: Deduction u/s 80C is not available against long-term capital gains as long-term capital gains is an income chargeable at special rate of tax 10% in case of sale of shares and hence in the above case, taxable income and tax liability will be as under:

4. I have brought forward long-term capital losses on sale of shares of Rs. 5 lakh and long-term capital gains of Rs. 2 lakh in FY 2021-22. Why is income tax return filing utility available on Income Tax Portal setting off entire Rs. 2 lakh capital gains against brought forward losses when Rs. 1 lakh is not taxable at all u/s 112A?

Reply: It is a well settled position of law that the brought forward losses will have to be set off against gains prior to the calculation of taxes.

Hence, before one could claim benefit of no tax on the first Rs. 1 lakh of long-term capital gains, set off of brought forward losses plays its role.

Thus, in the above case, long-term capital gains of 2 lakh will first be set off against the brought forward losses and only in case of excess gain over brought forward losses, the benefit of no tax on the first 1 lakh of long-term capital gains u/s 112A can be claimed.

In other words, tax computation by income tax return filing utility is correct.

5. Are there any chances of extension of due date for filing Income Tax Return for AY 2022-23?

Reply: There is no official communication from Income Tax Department yet regarding extension. However, considering the difficulties faced by the taxpayers and professionals in filing tax returns and representations made by various associations highlighting those issues faced, it is probable that the due date for filing Income Tax Return may be extended by the CBDT.

2. Things To Consider At The Time Of Filing of the Income Tax Return

1. Annual Information System and Tax-Payer Information System

The government, with its aim of ‘less government more governance’, have introduced two new statements for taxpayers viz. AIS an TIS.

These statements include information relating to interest, dividend, business receipts, cash deposits/withdrawals, transfer of securities and units of mutual funds, investments in government bonds, TDS/TCS, refund of income tax, transfer of land or building, foreign remittance information, credit card payments, transaction in term deposits etc. reported by various entities to the income tax department.

The main objective of these statements is to assist taxpayers in accurately filing their tax returns and ensure that they do not skip out reporting any vital information which have a bearing on their income tax returns.

If in taxpayer’s opinion, the information reflected in AIS is incorrect, duplicate, non-taxable, relates to some other person or any other year, then, an added functionality of accepting online feedback from taxpayer is in place, which enables the taxpayer to correct and amend the information reported therein.

Taxpayer can also upload feedback in offline manner by using AIS utility. If the taxpayer submits feedback on AIS, the derived information in TIS will be automatically updated.

2. Procuring Capital Gains Statement from your broker/PMS

There can be transactions where there are switch-ins and switch-outs between various schemes of mutual funds and sale proceeds of one scheme are utilised to buy units in some other scheme.

Income tax considers such switch-outs as transfers and attract capital gains tax.

One must take care of such type of transactions at the time of filing their iIncome tax returns and thus it is always advisable to get capital gains statements from all brokers.

Also, the tax rates vary depending on the type of capital assets like equity-oriented funds, debt or hybrid funds, REITs, AIFs, bonds, etc. and thus a statement from the broker will help in appropriately calculating the capital gains tax.

3. Furnishing details related to foreign assets

With the advancement in technology, making investments in global markets has become easier with the use of mobile and web-based applications. Thus, it became imperative for the income tax department to regulate and keep a watch on these foreign transactions.

Accordingly, the income tax department has made it mandatory for all residents and ordinary resident taxpayers to report their foreign assets, foreign income and details of foreign bank accounts where they are signatories.

4. Other basic points to remember:

• Once the income tax return is filed, it will get processed only once it is e-verified. Hence, e-verification within 120 days is must.

• Do ensure that your bank is validated on the Income Tax Portal for refund to get credited in your bank account.

• Department sends communications on the e-mail address updated in the profile section of the income tax portal. Ensure that your own e-mail address is updated there. You can add your CA’s or tax consultant’s e-mail as the secondary e-mail and you can opt for receiving communications on both. In case you have moved to another residential address which is not updated in PAN records, and you are filing income tax return by using prefilled JSON file available on Income Tax portal, the address in the JSON file will be as per last address which is updated in the PAN database.

• In such a case, ensure changing the address manually in your income tax return before filing.

• Ensure comparison of tax liability under the old tax regime and new tax regime and select the one which is beneficial to you.

• Disclose details of exempt income appropriately like PPF interest, interest on tax free bonds, LIC maturity proceeds etc. even if it does not affect your tax liability.

This article has been authored by Umang Shah and Yash Mehta, Chartered Accountants at CB Mehta & Associates.

The views expressed here are those of the authors, and do not necessarily represent the views of BQ Prime or its editorial team.