As expected, Central Board of Direct Taxes has
issued a new notification last month to exempt salaried tax payers with income not
exceeding Rs. 5,00,000 from filing income tax returns. The notification stipulates various
conditions (same as previous year’s) which are required to be satisfied to be eligible
for the exemption.
One can read the conditions required to be
satisfied in Bachhat previous year’s article
here. The article also list down the
scenarios where the benefit shall not be available.
Subsequent to Bachhat's article,
CBDT also released FAQs on the last year’s
notification. Since the essence of
current year’s notification remains the same, same FAQs can be applied to it. Let us review few FAQs in this post to
understand who shall stand benefited for the exemption.
Suppose Manish
has a salary income of Rs. 6,20,000. His
interest income from savings bank account is Rs. 10,000 and as required by the
notification, he has reported his interest income to the employer and tax has
been deducted thereon. Thus his Gross
Total Income (as per tax parlance) is Rs. 6,30,000 for the year. Now he is claiming deduction under Section
80C of Rs. 1,00,000 by investing in PPF, paying life insurance premium, etc. Further he has invested Rs. 20,000 in tax
saving infra bonds under Section 80CCF. He also claims deduction of Rs. 15,000 under
Section 80D for health insurance premium paid on health policies. In total, he has paid / invested Rs. 1,35,000 (Rs.
1,00,000 + Rs. 20,000 + Rs. 15,000) under various tax saving instruments. Thus his Total Income (again as per tax
parlance) is Rs. 4,95,000 (Rs.6,30,000 – Rs. 1,35,000) for the year. Whether Manish is exempted from filing his tax
return as per the notification?
Yes. One needs to consider the ‘total income’ of Rs.
4,95,000 and not the ‘gross total income’ of Rs. 6,20,000 to check whether he
is qualified for exemption under the notification. Thus in our example, Manish is qualified to
take exemption and shall not be required to file income tax return for the
year.
Let us add one more criteria to the above example. Now suppose Manish has donated Rs.10,000
during the year and is eligible for the deduction under Section 80G.
In this case, exemption available to Manish shall
be withdrawn since as per the current guidelines, employers are not required to
take cognizance of donations made while deducting TDS, unless the donation is
to Prime Minister’s Relief Fund, Chief Minister’s Relief Fund or Lt. Governor’s
Relief Fund. Hence, Manish’s employer
will not consider donation of Rs. 10,000 and shall deduct tax on the same and
Manish shall be required to file return of income to claim refund of tax.
Similarly if one is claiming deduction of interest paid
on housing loan, he is not qualified for the exemption even though after the
deduction his ‘total income’ does not exceeds than Rs. 5,00,000. The reason being the notification is
applicable only if the individual has salary income and income from savings
bank account. Hence he shall be required
to file the return even though the entire tax is deducted by the employer and
no further tax is payable.
As Bachhat stated
last year, it would have made more sense if the circular had exempted all tax
payers with income not exceeding Rs. 5,00,000 provided all required taxes are
paid (either by way of TDS, Advance Tax or Self-Assessment Tax) and PAN number
has been quoted at the time of payment of these taxes.
Hopefully, better sense shall prevail during DTC and
we shall see some amendment. Till then,
it is wise to disregard this notification.
