CA > Inter > Paper 3 – Skim Notes

Chapter 8 : Provisions for filing Return of Income and Self Assessment

Overview

  • Understanding of what constitutes a return of income.
  • Identifying compulsory taxpayers and filing requirements.
  • Filing deadlines for different categories of taxpayers.
  • Consequences and penalties of late filing.
  • Interest and fees for delayed submissions.
  • Revisions and updates to income returns.
  • Requirements for Permanent Account Number (PAN) applications.

Key Topics

1. Return of Income

  • Return of income refers to the formal declaration of the income and tax liability of the assessee as prescribed by the Income Tax Act, 1961.
  • Returns must include details of all income sources, deductions, exemptions, and taxes paid or payable.
  • The Central Board of Direct Taxes (CBDT) prescribes different formats for various taxpayers for filing returns.
  • Different types of returns include Income Returns under section 139(1), Loss Returns under section 139(3), Belated Returns under section 139(4), Revised Returns under section 139(5), and Updated Returns under section 139(8A).

Deep Dive

  • Understanding the intricacies of required forms for various taxpayer categories.
  • The importance of filing accurate returns to avoid prosecution under section 276CC of the Income Tax Act.
  • The role of technology in facilitating e-filing of returns for faster processing.

2. Compulsory Filing of Return of Income [Section 139(1)]

  • All companies and firms must file returns annually regardless of income or loss level.
  • Residents whose total income exceeds the basic exemption limit must file returns based on defined thresholds.
  • Individuals, HUFs (Hindu Undivided Families), AOPs/BOIs whose income exceeds specified limits are mandated to file returns.
  • Specific conditions apply to certain transactions, including foreign assets ownership or signing authority in foreign accounts.

Deep Dive

  • Exploration of the definition of beneficial owner versus beneficiary in tax terms.
  • Impact of international norms on filing for tax returns due to overseas financial assets.

3. Due Dates for Filing Return

  • Due dates vary based on the type of taxpayer: Companies and firms have deadlines of October 31st, partner firms have November 30th, and other taxpayers have until July 31st.
  • Audits or specific financial transactions can extend the due date provisions as per section 92E.
  • Late filing attracts defined penalties under sections 234A and 234F.

Deep Dive

  • A case study illustrating how due date changes impact a business’s financial planning.
  • Comparison of filing deadlines in different accounting regimes—fiscal year vs calendar year.

4. Consequences of Late Filing

  • Late submission of returns results in interest penalties under section 234A, calculated at 1% per month until the return is filed.
  • Fees for failure to file on time are stipulated under section 234F with penalties of up to ₹5,000 or ₹1,000 depending on total income.
  • Failure to file affects the ability to carry forward certain losses or claim certain deductions.

Deep Dive

  • Understanding the economic impact of late filing penalties on taxpayers.
  • Real-life examples of litigation arising from late submissions and penalties assessed.

5. Computation of Interest and Fees

  • Interest for late filing is calculated on the amount of tax due as assessed, starting from the initial due date.
  • Under penalty matrices, there are structured systems for assessing fee amounts that are predictable for taxpayers.
  • Assessment adjustments can reduce penalties based on timely tax payments.

Deep Dive

  • Model computations for different late filing scenarios to illustrate penalties graphically.
  • Exploration of legislative intent behind penalty provisions for delayed submission.

6. Revised and Updated Returns

  • Taxpayers can revise returns under section 139(5) before the specified date to correct any omissions.
  • Updated returns can be filed within two years of the end of the relevant assessment year, but certain conditions apply.
  • Revisions ensure taxpayers in good faith can rectify mistakes without penalties.

Deep Dive

  • Impact of technology on Taxpayer facilitation and revision processes in evolving tax regimes.
  • Comparison of the old rules against new updates regarding tax reforms and ease of filing.

7. Permanent Account Number (PAN) Provisions

  • Mandatory for all taxpayers; filing related to PAN is critical for processing income taxes efficiently.
  • Individuals and other entities otherwise not falling into taxable categories still may need to obtain PAN if certain income thresholds or transactions are met.
  • Requirements for quoting PAN in various financial transactions to ensure compliance are outlined in detailed rules.

Deep Dive

  • Discussion on policy reasons behind linking PAN with tax compliance and revenue collection.
  • Examination of failures in PAN compliance and their impacts on taxpayers and their financial activities.

8. Quoting of Aadhaar Number

  • Individuals eligible for Aadhaar must mandatorily quote their Aadhaar in specific documents including tax returns.
  • Failure to link PAN with Aadhaar can lead to penalties and operational problems for taxpayers.
  • Legislation requires clear communication around Aadhaar provisions impacting tax refund and PAN operation.

Deep Dive

  • Review of the implications of Aadhaar linking in tax administration in India.
  • Public perceptions and challenges related to Aadhaar Privacy issues and its impact on compliance.

9. Filing through Tax Return Preparers

  • Tax Return Preparers (TRPs) have been provisioned to assist taxpayers by preparing returns on their behalf.
  • Eligible individuals for availing TRP services include non-complicated taxpayers, making processes simpler and user-friendly.
  • TRP schemes ensure quality service and accurate returns to enhance compliance rates.

Deep Dive

  • Impact of TRPs on taxpayer compliance rates and ease in the submission process.
  • Discussion on regulatory frameworks governing TRP operations and taxpayer safety.

10. Persons Authorized to Verify Returns

  • Different categories of assessors have specific persons who are authorized to verify the returns based on their structure and relationships.
  • Flexibility in verification allows proper handling of returns amidst circumstances such as absences or disabilities.
  • Legal implications of unauthorized verification are critical to understanding debtor liabilities.

Deep Dive

  • The role of legal advisors in ensuring compliance and handling verification disputes.
  • Case study analysis of legal challenges associated with verification processes under different tax categories.

Summary

This chapter provides a thorough framework regarding the provisions for filing income tax returns and self-assessment as per the Income-tax Act, 1961. It covers aspects such as the definition and requirements of returns, mandatory filing regulations, deadlines based on taxpayer categories, and consequences of non-compliance including penalties and interest. Furthermore, it explores procedures for revising or updating returns, application and compliance with PAN and Aadhaar numbers, and the beneficial role that Tax Return Preparers (TRPs) play in the income tax filing process. Knowledge of who is authorized to verify returns and the potential ramifications of incorrect filings allows taxpayers to navigate their responsibilities effectively.