July 31st is the deadline to file your Income Tax Returns. This year’s process will be slightly different. Apart from a new Format of Form16, there are a couple of more changes that the tax filers need to keep in mind. The documents required include:
- Annual Information Statement
- Form 16
- TDS Certificate (FDs, Sale of property, dividends, Monthly rent Above INR 50,000
- Interest Income Certificates
- Capital Gains Statements
- Tax-Saving investment documents
- Proof of Unlisted Shares held
The foremost step is to collect these documents and reconcile them to avoid potential discrepancies. Employers now will have to give a detailed break up of salary.
Interest On PF
- For the first time in this assessment year, taxpayers will need to declare interest on contributions in their PF account exceeding INR 2.5 Lakh.
- This cap applies to contributions made by the employees, not the employer
- Also includes contributions to VPF( Voluntary Provident Fund).
- The contribution limit for Government Employees is INR 5 lakh.
- Employer’s Provident Fund Organization (EPFO) will keep and maintain two separate accounts- non-taxable and taxable for the members who contribute over INR 2.5 Lakh and compute tax on the latter accordingly
- TDS rate for PAN-linked accounts will be at 10% and 20% for accounts not linked by PAN
- EPFO will not deduct tax on the interest accrued if the TDS amount computed is upto INR 5,000 but taxpayers’ liability will not be dissolved in this case.
- The excess interest will be reported under income from other sources, if the TDS is not deducted, and it will be added to the total income and will be taxed as per slab.
- Taxpayers who have sold land or building in the FY 2021-2022 will now have to disclose all of the information regarding the Sale proceeds, this year onwards
- These steps are being taken to enhance the transparency in the calculation of related Capital Gains.
- Long term Capital Gains section in the form will now require you to mandatorily mention the date of sale and purchase of the property
- Until now LTCG from real estate is triggered if the property is held more about more than 24 years, and is qualified for tax exemption if the gains are invested as per section 54( sales proceeds of the residential property invested in residential property), Section 54EC( Sales proceeds of the residential property invested in Government Bonds) and section 54E( sale proceeds of non-residential property in residential property).
- Declaration of date of sale and purchase adds a layer of transparency to categorize the property as a long-term capital gains asset or it does not qualify for these tax brackets.
- Any renovation costs for such properties also qualify for deductions in the sale price while computing capital gains, such costs can also be indexed to account for inflation. Year-wise details of the costs of renovations will also have to be provided.
- Though this rule only applies to residential properties and not commercial properties.
Reconcile AIS( Annual Information Statement)
It was introduced in November 2021 and stands as a detailed financial statement which contains information on all of the financial transactions of a taxpayer including income from different sources, foreign currency purchases, TDS and TCS, advance or self-assessment tax paid to the government, refund initiated, statement of high-value transactions.
The taxpayer needs to reconcile this statement against TDS certificates, Interest income certificates, and Form 26A and go through it thoroughly as any undisclosed income can invite unwanted Scrutiny, if anyhow taxpayer finds any information to be incorrect, they can get it rectified through feedback submitted to the IT department before filing the ITR. Dispute resolution usually takes about 1-2 weeks hence the earlier it is submitted the better so that you do not default on the filing date.
As we see, these new forms for FY2021-2022 are quite elaborate, and the changes were added and notified early for the assesses to get enough time to keep the documents ready, We are sharing this as a reminder so that you take the required action and bring about changes relevant to you. There are in total about 30 changes in the form for this assessment year or what you can do incase you file wrong information in your AIS.
Rurash currently offers taxation services to exclusively under our financial concierge services for NRI investors. However, you can reach out to us incase you need to connect with a wealth custodian for tax planning.