How to generate Electronic Verification Code to verify Income Tax Return

In addition to the changes to the ITR forms, tax department has also modified the method to carry out electronic verification of the Income Tax Returns.  Until last year, taxpayer was required to upload the income tax return online and later ITR-V was generated.  A print out of ITR-V alongwith taxpayer’s signature was required to be sent by post to Income Tax office at Bangalore. 

For the current year, in addition to this method, there are alternate ways by which verification can be carried out electronically without any subsequent requirement to post the physical copy to Income Tax office.  This post shall guide you in how to generate Electronic Verification Code (EVC) to file Income Tax Returns.

EVC through net-banking

Taxpayer can use the net-banking facility provided by their banks to generate EVC.  Bank already has PAN account details of the customers as part of their KYC requirements which shall be used to generate EVC for the taxpayer.  All major banks (both public as well as private) are providing this service and EVC can be generated by login into respective net-banking sites.  Alternatively, user can also login into https://incometaxindia.gov.in and select ‘Generate EVC’ option under ‘e-File’ menu.  Tax payer shall get two options to generate EVC.  The second option is to generate EVC through net-banking.  After selecting this option, taxpayer shall be redirected to list of banks providing this facility.  Taxpayer needs to login into respective net-banking facility and complete the process to generate EVC which will be sent to his registered email id and mobile number.  This EVC can be used to verify the return submitted online.

EVC through OTP

The other option under the ‘Generate EVC’ menu is EVC generation through one-time password.  However this can be opted by only those taxpayers whose Gross Total Income as reduced by deductions is less than Rs. 5 lakhs and there is no refund claim.  Under this option, EVC shall be sent to registered email id and mobile number of the taxpayer and can be used to verify the return submitted online.

EVC through Aadhaar Card

EVC can also be generated by linking one’s Aadhaar Card with PAN number.  After login into https://incometaxindia.gov.in, under ‘Profile Setting’, there is an option for ‘Aadhaar linked to PAN’.  Taxpayer should enter their Aadhar number and EVC shall be generated after the name, date of birth and gender matches exactly with PAN database. This EVC shall be sent to mobile number registered with Aadhaar card and can be used to verify the return submitted online.

EVC through ATM   

Another way to generate EVC is through ATM machines of banks.  There is an option to select ‘Generate EVC for Income Tax Return Filing’ after validating ATM card in the ATM machine.  Taxpayer shall receive OTP on his registered mobile number which can be used to verify the return submitted online.

If the taxpayer cannot make use of any of the above methods, then he needs to take print out of ITR-V and send it via post to Income Tax Office at Bangalore.

Above options have made it very convenient for the taxpayer to file and verify the income tax return online.  Do let us know out of the above, which method you shall use to verify your income tax return?

Selecting the correct IT Return form

New Income Tax Return forms were notified by Government recently.  There are few changes regarding applicability of the form for tax payers as well as additional information requirement to be submitted while filing return.  In this post, we shall help you choose the correct IT return form to file the return and also discuss the additional information required to be submitted.

Correct ITR Form for you

The selection of the IT return form is based on the nature of the income earned by taxpayer.  Primarily the nature of income earned can be categorized into following categories:

1.      Income from Salary / Pension

2.      Income from House Property

3.      Capital Gains

4.      Income from Business / Profession

5.      Income from Other Sources

The following table shall assist you in choosing the correct IT return form. 

INCOME TAX RETURN FORM from Vishal Shah

How to use the above table:

1.  List down the nature of income for the year applicable from the Column titled ‘Nature of Income’

2.  Start with ITR 1 – Sahaj.

3.  If the nature of income denoted as YES matches with all your nature of income, you need to use ITR 1 – Sahaj to file the return.

4.  If not, then move to ITR 2A.  Repeat Step 3 and so on until all your nature of income matches with corresponding entries against these forms.

Additional Requirements

From this year, taxpayer needs to provide his passport details as well as details of bank accounts held (excluding dormant accounts) during the previous year.  Further, in case taxpayer holds any foreign assets or has income from any source outside India, various details are required to be furnished with regards to such income / assets. 

Further, from current year, besides normal submission of ITR Verification by way of post, there are additional ways to provide verification through electronic modes.  We shall discuss this in our subsequent post. 

More taxes, additional deductions but no impact on investments

There were huge expectations from the first full-fledged budget of National Democratic Alliance after coming to power last year.  In this post, we shall review the measures proposed in the budget which shall have impact on individual tax payers and their investments.

Major revenue booster

One of the measures having significant impact on the revenue collection is additional surcharge of 2% over and above existing 10% surcharge for individuals having taxable income of more than Rs. 1 crore.  This additional surcharge is in response of abolition of wealth tax.  While the abolition of wealth tax was a long pending demand, 2% additional surcharge shall more than compensate any loss to the exchequer on account of wealth tax abolition.  To quantify, wealth tax generated revenues of Rs. 844 crores in FY 2012-13, whereas 2% additional surcharge on all taxpayers (including domestic companies) is estimated to generate Rs. 9,000 crores to the government.

Effective rate for service tax has been increased from 12.36% to 14%.  There is also an enabling provision in the budget to allow Government to levy additional surcharge of 2% to achieve Swachh Bharat objectives.  Excise duties are ‘rationalized’ by increasing it moderately from 12.36% to 12.5%.  These changes in service tax and excise duties shall make almost all the things under the sun dearer.

Surcharge on dividend distribution tax on dividend received from debt funds has been increased from 10% to 12%.  Thus the effective DDT rates for retail investors in debt funds shall marginally increased to 28.84% from existing 28.352%.  

Correcting loopholes

Another measure which has missed the limelight of the media is TDS on deposits with banks. Currently Rs. 10,000 threshold for determining whether TDS is to be deducted was applied on each branch of the bank.  Thus if an individual had fixed deposits in two branches of the same bank earning total interest of more than Rs. 10,000, however the interest earned in each of the individual branch was less than Rs. 10,000, TDS was not required to be deducted.  This loophole has been rectified.  Now, the threshold interest amount shall be determined at bank level instead of branch level.  This is applicable for all banks following core banking solutions (who doesn’t nowadays?) and is effective from 1^st June 2015.

Increased and new deductions

These primarily relates to health related expenditures and can be best explained by way of following table:

Expenditure incurred on	Self and Family (spouse and dependent children)	Parent
A.      Medical premium	Rs. 25,000	Rs. 25,000 (if Senior citizen – aged 60  years and above, then Rs. 30,000)
B.      Medical Expenditure in case of very senior citizen (aged 80 years and above) provided such citizen is not covered under any medical insurance plan	Rs. 30,000	Rs. 30,000
C.      Total Deduction under A and B capped at	Rs. 30,000	Rs. 30,000

Further limits for few other deductions is increased.  Now individuals can claim deductions to the extent of Rs. 40,000 for certain chronic diseases such as cancer, aids, etc.  In case such expenditure is for senior citizen (self or dependent relative), the deduction is Rs. 60,000 and for very senior citizen, it shall be Rs. 80,000.

One important hidden change is deleting the requirement for providing certificate in prescribed form from the specialist doctor working in Government hospital to claim this deduction.  Now a prescription from a specialist doctor for medical treatment shall be sufficient document to claim this deduction.  This shall certainly lessen the hardship for individuals.

Deductions with respect to medical expenditure for persons with disability has been increased from Rs. 50,000 to Rs. 75,000 and persons with severe disability has been increased from Rs. 1,00,000 to Rs. 1,25,000.

Deduction on account of payment made to LIC or other insurers for annuity plan has been enhanced from existing Rs. 1,00,000 to Rs. 1,50,000.  However this is within the overall limit of Rs. 1,50,000 and may not benefit individuals if they are exhausting their limits by other means such as insurance premium, PPF deposits, etc.

Additional deduction of Rs. 50,000 over and above existing deduction of Rs. 1,00,000 is proposed for contributions made by an individual to a notified pension scheme.  This is aimed at to boost NPS as well as encourage additional investments for retirement benefits.

Further the recently introduced Sukanya Samriddhi Account Scheme by Prime Minister Narendra Modi got a boost by including any investments into that scheme eligible for deduction under Section 80C within the overall limits of Rs. 1,50,000.  Further any interest accrued on such deposits as well as withdrawals in accordance with the scheme shall be exempt from tax.

Another pet project of the Prime Minister, Swachh Bharat, got its mention in the budget.  Any donations made to Swachh Bharat Mission as well as Clean Ganga fund shall be eligible for 100% deduction.  This is applicable retrospectively from 1^st April 2014. 

There is some reference to flexibility for employees to choose between employee provident fund and national pension scheme and exemption from contribution to EPF for employees below a certain threshold of monthly income.  However, there is not much clarity at this point of time on how this will be implemented and administered.

Bachhat’s take

Overall, things change a little for individual taxpayers in this budget.  There shall be lesser savings on account of rise in overall expenditures by way of excise and service tax hikes, but additional deductions can be claimed on account of certain expenses like health related and investments like NPS and Sukanya Samriddhi.  There is no change in slab rates, basic exemption limits, and capital gain tax.  From personal finance point of view, no need to review your existing investments and no game changer.  But hey, it was not expected to be!!!

Do pour in your comments on the budget.

Updated for DDT on debt funds and EPF / NPS portability.

Opt for Basic Services Demat Account

Most of us have one or multiple demat accounts where the investments (stocks and mutual fund units in this case) are held.  The charges for demat account varies across players but generally are upwards of Rs. 400 per annum.  For eg: ICICI Securities charges Rs. 500 per annum for a demat account.

However what many of us are not aware about is in case the holding in our demat account is not significant, we can opt to switch to Basic Services Demat Account (BSDA) where charges are capped at Rs 100 per annum. 

Though Rs. 400 per annum of savings may not be a significant amount, the objective here to use the low cost facility available without compromising on the features and benefits.  In this post, we shall delve into features about BSDA and who can open it.

Who can have BSDA?

Sebi vide its circular dated August 27, 2012 mandated depositories to provide an option from October 1, 2012 to all retail individual investors to open BSDA.  Thus this is an old concept but not many are aware about it since it has not been publicised by depositories for obvious reasons.  An individual can have one BSDA account across all depositories.  Such individual should be a sole or first account holder and the demat account can be treated as BSDA if the total value of the securities held in such account does not exceeds Rs 2,00,000 at any point of time.

For eg: If you are having two demat accounts, say one with ICICI Securities and another with HDFC Securities, only one out of the it can be BSDA provided the value of securities in such demat account does not exceeds Rs. 2,00,000.

Similarly if in one demat account you are the sole holder and in the other you are not the first holder, then the demat account where you are the sole holder is only eligible for BSDA, again provided the value of the securities does not exceeds Rs 2,00,000.  However the other demat account can be eligible for BSDA for the first holder of that account.

Charges

The charge for BSDA depends on value of securities in the demat account.  If the value of securities does not exceeds Rs. 50,000, then there is no annual maintenance charge.  In case the value of securities is between Rs. 50,001 to Rs. 2,00,000, then the maximum amount the depository can charge is Rs. 100.  If the value of securities in a BSDA account exceeds the above limit on any day during the tenure, then it ceases to be BSDA account and charges applicable to regular accounts shall apply from that date onwards.

How is value of securities determined?

Value of securities is determined based on the market value of securities held in the account. In case of unlisted securities, face value shall be taken into account.  In case of mutual fund units held in demat account, daily NAV shall be used to determine the value.  Such value should not exceed Rs. 2,00,000 to qualify for BSDA.

How to open BSDA account?

An individual can choose for BSDA account at the time of opening a demat account.  In case one already has a demat account, there is an option to convert the same into BSDA account at the end of the billing cycle provided the value of securities in demat account does not exceeds Rs. 2,00,000.  Infact your depository shall provide you the option to convert your account into BSDA before commencement of next billing cycle based on the value of your holdings.

Other features of BSDA account

• An individual shall receive transaction statement at the end of each quarter provided there are transactions during the period. 
• An annual physical statement of holding shall be sent at the end of the year.
• Electronic statements shall be provided free of cost.
• In case of physical statements, the depository shall provide at least two statements free of cost during the billing cycle. Additional physical statement may be charged at a fee not exceeding Rs.25/- per statement.
• SMS facilities for transaction alert is provided without any additional cost.
• Minimum two delivery instruction slips shall be issued at the time of opening BSDA.

Bachhat’s take

While the monetary benefit is not significant in absolute term, it is always preferable to have services with minimal cost and one can opt for BSDA if the holding does not exceeds Rs. 2,00,000.  Further in case of a family having multiple demat accounts, each account is eligible for BSDA if the accounts are in the name of different family members.

Where you aware about BSDA?  Will you opt for or have opted for BSDA?  Do share your thoughts and comments in the comment section below.