Tag: income tax return filing

Tax Query: How to file return of income for deceased father

Personal Finance

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My father died on 1st April,2020 without making will. The surviving heirs in the family are my mother, three married sisters and myself. It will not be possible for me to obtain succession certificate or arrive at distribution of wealth of my deceased father by mutual understanding. amongst surviving heirs in short time. In the name of my deceased father I have following taxable income . (i) Rental income from house property for flats and shops given on rental basis. Here the related properties are held by my deceased father jointly with my surviving mother. Investments in these properties were made by my deceased father out of his taxable income, and nothing was contributed by mother towards investment. (ii) Rental income out of banquet hall given to public for marriage and other social functions. Banquet hall is in the sole name of my deceased father and it is on rentalpagadi basis. (iii)Profit out of business of retail shop selling Spectacles, Watches and Clocks. This business was run by my father on a proprietorship basis in his name, and my father was showing income out of it in his return of income. How do I file return of income in case of my deceased father in respect of above income for the financial year 2020-21? Please also let me know whether rental income from shops and residential flats as detailed at point No. (i) above can now be reported by me in my mother’s return of income, since she is the second name holder to properties jointly with my deceased father, and I am collecting cheques for rental in my mother’s name and depositing the same in her bank account.

Vijay Ved

When a Hindu male dies intestate (without leaving a will), the Hindu Succession Act could be applied for dividing the wealth among the Class 1 legal heirs. In the current circumstance, your mother, you and your sisters will qualify as Class 1 heirs. Class 1 heirs will have equal rights on the assets of the deceased. It is advisable to get a legal view on the above.Accordingly, rental income from banquet hall and business income from shop is equally taxable in your hands. With respect to property income where your mother is a joint owner, in the absence of any information on proportion of holding, your father’s share of 50 per cent in the property will equally vest with all the five of you being class 1 legal heirs. You all will have to pay tax on income from this portion of property. While your mother will in addition will also be taxable on her balance ownership of 50 per cent.

The writer is Partner, Deloitte India

Send your queries to taxtalk@thehindu.co.in

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When interest u/s 234 A, B, C can be levied by the taxman

Personal Finance

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A coffee time conversation between two colleagues leads to an interesting explainer on tax jargons.

Vina: Thank God, the due date to file our tax returns has been extended up to December 31, 2021. I can now shift my focus on other things, instead of racing to finish this annual obligation.

Tina: True that. But I hope your tax dues for 2020-21 which you have left unpaid, are less than ₹1 lakh?

Vina: That calculation I am yet to do. What’s so special about this ₹1 lakh limit?

Tina: The extension in return filing date does not apply to those who have an unpaid tax liability of more than ₹1 lakh.

Unpaid tax liability here implies one’s tax liability in a year, reduced by advance tax instalments paid, any tax collected or deducted at source, any relief of tax allowed under sections 89, 90, 90 A or 91, or any alternate minimum tax credit allowed to be set off under the IT Act.

Thus, the due date of filing returns for whom the unpaid tax liability exceeds ₹1 lakh, is still July 31, 2021.

Interest at the rate of one per cent per month is levied on your unpaid tax amount, under section 234 A of the Act if tax returns are not filed by the due dates.

Vina: What? So, by not furnishing returns by July 31, 2021, I am liable to pay interest at the rate of one per cent on my tax liability for every month since July 31?

Tina : Yes. But if you have outstanding tax of less than ₹1 lakh, this provision will not be applicable.

Vina: Let me hurry up and check where I stand.

Tina : But wait… Whether your return filing date is July 31 or December 31 this year, you also need to check if interest under sections 234 B and 234 C are applicable.

Vina: Oh, what do these ask for ? More tax, am sure!

Tina : You are partly right. If your tax liability after TDS in any financial year amounts to ₹10,000 or more, then you need to pay advance tax in four instalments during the course of the financial year itself.

Vina: And, if I’ve completely missed this…what happens?

Tina: You will be required to pay interest on any shortfall in advance tax payments under section 234 B and 234C of the Income Tax Act, at the rate of one per cent per month (under each section), for every month of delay.

So, if you file your returns anytime until December 31 due to extension of the deadline (even if your dues are within ₹1 lakh) and decide to pay all the taxes due when filing the return only, the charges under 234 B and C will go up.

While interest is levied under section 234 C for defaults or delays in quarterly payments of advance tax, section 234 B applies when the tax payer has not paid at least 90 per cent of the tax for any financial year as advance tax by April 1 of the following year.

Vina: That’s a lot of insight Tina. Thank you very much for enlightening me. Will go and file my returns ASAP!

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How banks, mutual funds and companies will check if you have filed ITR, BFSI News, ET BFSI

Banking & Finance

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Effective from July 1, 2021, a person who has not filed ITR for the previous two financial years and the aggregate TDS and TCS deducted from payments made to him/her in each of these financial years exceeds Rs 50,000, then such person would be subjected to higher TDS rate.

Deductors of TDS/TCS like banks, mutual fund houses etc can now check if you have filed ITR when your income crosses the TDS limit from July 1, and levy two times the TDS amount if you haven’t filed your tax return. For this purpose, the income tax department has launched a compliance check utility for tax deductors on the department’s reporting portal. Further, the tax department has prepared a list with names of taxpayers who have not filed their ITRs for the previous two fiscals, which can be used by deductors.

Here is a look at how financial institutions will check if individuals have filed ITR or not to see if higher tax has to be deducted from their income. Also, what a taxpayer can do if their name appears on the list of those who haven’t filed ITRs for the previous two years.

When will higher TDS/TCS be levied?
As per the announcement made in Budget 2021, if an individual satisfies the following conditions, then he/she will be subjected to higher TDS/TCS rate:
a) If the individual has not filed income tax return in the two previous financial years for which due date has expired as per section 139(1) of the Income-tax Act, 1961 and
b) Sum of TDS and TCS in each of the financial years is more than Rs 50,000

Chartered Accountant Naveen Wadhwa, DGM, Taxmann.com says, “If for the relevant financial years an individual has filed belated ITR or filed ITR in response to a notice from tax department, then Section 206AB would not be applicable. It would mean that higher TDS would not be deducted on incomes.”

Compliance check utility for sections 206AB and 206CCA
As mentioned above, a compliance check utility has been launched on the income tax department’s reporting portal: https://report.insight.gov.in/reporting-webapp/portal/homePage.

Here, if an individual comes under the purview of TDS, i.e., his income exceeds the specified limit, then the financial institution such as bank, mutual fund etc., would check if the tax on the income accrued would be deducted either at the normal rate (if the above-mentioned conditions are not satisfied) or at higher rate as mentioned in the newly enacted law.

For instance, if the interest income from fixed deposit during the FY 2021-22 exceeds Rs 40,000 in a financial year, then tax would be deducted on the interest income.

As per the circular, the tax deductor or collector can enter single PAN or multiple PANs of the deductee or collectee on the reporting portal. The deductor or collector will get a response from the reporting portal if the TDS on income of such a person would be deducted at a higher rate.

As per the functionality offered on the reporting portal, a list of persons is prepared by the tax department at the start of the financial year 2021-22. This contains name of taxpayers who have not filed ITR in the previous years, i.e., 2018-19 and 2019-20. These two financial years are taken as the relevant previous years where ITR was not filed and aggregate of TDS and TCS exceeded Rs 50,000 in each of the financial years.

Can your name be removed from the list?
The tax department’s June 22, 2021 circular states that if the specified person, i.e., the person whose name has appears on the list, files ITRs for FY 2018-19 and 2019-20 during the financial year 2021-22, then his name would be removed from the list. Wadhwa says, “The due date of filing ITR for FY 2018-19 and 2019-20 has expired on 30-11-2020 and 10-01-2021 respectively. Thus, an individual cannot file ITR now, unless a notice is received from the income tax department to file ITR.”

If the taxpayer files valid ITR (i.e., filed and verified) for FY 2020-21, then his/her name would be removed from the list. Wadhwa says, “A taxpayer should ensure that once ITR is filed, it is immediately verified. The name from the list on the reporting portal would be removed either once the due date has expired (i.e., after September 30, 2021) or date of filing valid return (filed & verified), whichever is later. Thus, if you have filed and verified ITR before the expiry date (September 30, 2021 for FY 2020-21), then your name would be removed after the expiry of deadline. However, if you file your ITR, say on September 25, 2021, and verify it on say October 15, 2021, then name from the list would be removed from the list after October 15, 2021.” As per income tax laws, a taxpayer can verify his/her return within 120 days of filing ITR.

However, no new names would be added to the list. Wadhwa says, “This would mean that banks, mutual funds or any other deductor would check only once during the FY 2020-21 at the time of deducting taxes from the income accrued. If the name does not appear on the list, then such deductor would continue to deduct taxes at normal rates throughout the year. However, if higher TDS is applicable and ITR for FY2020-21 is filed during the year, then individual would have to inform the deductor, i.e., bank, mutual fund etc. to check the list again after filing ITR and deduct TDS at normal rate.”



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