As many as 85 lakh salaried tax payers with an annual income of up to Rs 5 lakh will not have to file income-tax return from now onwards, a finance ministry official said. "No income-tax returns would be required for salaried persons earning up to Rs 5 lakh per annum. We would notify this in first week of June," outgoing Chairman of Central Board of Direct Taxes Sudhir Chandra told reporters here.
However, he said this would not cover income from other sources like house property , capital gains and gains from profession and business.
The scheme would be applicable from assessment year 2011-12 onwards. The scheme would be applicable from assessment year 2011-12 onwards. This means that salaried persons eligible under the scheme would not have to file returns for the Financial Year 2011-12 (Assessment Year 2012-12).
Under the scheme, those salaried persons who want to claim tax refund, would have to income tax file return. As per the Memorandum to the Finance Bill 2011, the government will be issuing a notification exempting 'classes of persons' from the requirement of furnishing income tax returns.
Under the scheme, the salaried person wants exemption from filing IT return, has to disclose about the incomes like dividend and interest to his employer for tax deduction. In the scenario, the Form 16 issued to salaried employees will be treated as income tax return. At present, it is obligatory for all salaried persons to file income tax return under the Income Tax Act, 1961.
The idea behind the move is that in cases where there are no other sources of income, filing of a return is a duplication of existing information.
What should you do?
- It is not mandatory but it's better to file as Income Tax Return acts as income proof for getting loans and many other such financial transactions.
- If you are expecting a refund you must file the return.
- It covers only Income and interest hence if you have other sources of income, you must file the return.
- It assumes that you have declared all your sources of income specially interest income to the employer so that it is covered in form 16. If not you better file the return. This initiative by the Govt assumes that all your taxes have been deducted at source (TDS) and it is reflected in form 16.
Conclusion: If your income is less than Rs 5 lakhs, income sources are declared in form 16 and TDS deducted, then you need not file tax returns. The Govt is willing to consider the form 16 as tax return.
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