Nitty-Gritty of Income Tax

I, have come across with numerous questions from various level of people who have some or other kind of questions related to their Income Tax matter, in this article I would try to list most commonly or frequently asked questions and try to provide you with the answers in most lay man’s term without using any kind of Legal or difficult words.

To start with Income Tax Return we should understand first everything about a PAN card:

1. What is a PAN Card?

The full form of PAN is: Permanent Account Number. This is a unique ten digit alphanumeric number provided by the Income tax department to each applicant. This is a sort of Financial Identity of the person to whom that that card belongs to.

2. What dose the Characters in the PAN number stands for?

A PAN card contains TEN characters which are alphanumeric, would like to educate you all that they are not random. A typical PAN is AEZPK0967L, in this the first three characters are ‘AEZ’ which are alphabetic series running from AAA to ZZZ, the fourth character of the PAN is ‘P’ in the above example which means ‘Individual’, ‘F’ stands for Firm, ‘C’ stands for Company and ‘H’ stands for HUF (Hindu Undivided Family), ‘A’ for Association of Persons (AOP), ‘T’ for Trust etc. The fifth character in the PAN No represents the first character of the surname of the PAN holder, now the numeric numbers in the PAN represents sequential number starting from 0001 to 9999. The last character in the above example is ‘L’ which represents a alphabetic check digit. For us to understand and remember is that we should check our PAN numbers with fourth and fifth character as they represent your status and surname. In case of any discrepancy we should immediately bring it in the notice of the issuing authority.

3. Just having a PAN number means that I have to pay Tax?

No it’s not that, paying tax depends upon the annual income of an individual.

4. How should I get my data corrected / updated in my PAN Card?

There is a form called as CSF form which needs to be filled up and you need to tick over the left box which ever is applicable. Further you need to submit the supporting documents to support your request for correction in the records.

5. I am a married lady now, I have my PAN card with my maiden surname, now I want to get the same changed/updated to my husband’s surname, what should I do?

It’s a very old tradition that the lady changes her maiden surname after her marriage, to change the surname from maiden name to husband’s surname the married lady needs to submit a correction form along with a proof of marriage and the valid documents are: marriage certificate, invitation card either side, publication in the newspaper. The PAN number remains the same only the surname changes in the new card.

6. Why a lady has to mention her father’s name in the PAN application form?

The reason to have father’s name always over the PAN card even for married ladies is that a married women’s status can change any time due to the following reasons : divorce taking place, death of husband, remarriage of the women, not changing the surname at all even after her marriage.

Therefore to identify her always it’s better to have the father’s name over the PAN card rather than the husband’s name.

7. I am a divorced lady now, can I get back my maiden surname in the legal documents such as Passport, PAN etc.

Yes you can do so; first of all you need to get the final divorced decree from the court, then the very first step towards getting back your maiden name is to apply for updated PAN card with the support of your divorce decree, this would be the starting of getting back all other legal documents into your maiden name.

These were some queries related to PAN Card which are most commonly being asked, now moving forward about the ITR matter: (Salary Class & Self Employed Category)

1. Why should I file an ITR?

Filing an ITR (Income Tax Return) is very important for every citizen as it’s a document which provide an information about your total annual income for the previous year, and if it exceeded the maximum amount them it become necessary to file your return, and you shall get the benefits of any tax paid in excess as a refund on the basis of your annual savings etc. In short it is your Financial CV.

2. What’ll happen if I do not file my ITR return at all?

Not filling your ITR is an offence U/s 276-CC of the Income Tax Act, 1961, howsoever income is getting taxed should file an ITR without any default.

3. I am getting Form 16 from my office, isn’t it sufficient enough?

No, it’s not sufficient enough as its not providing the complete picture of your income, its just showing your salary income, you may have a rental income from somewhere for example house property, your interest income from your savings or fixed deposits in the banks or post office. Hence, to cover all the area and to compute your actual total income of a given year you need to file an ITR for that.

4. What dose FY or AY stands for I completely get confused when some account personnel’s talks to me in these terms in my office?

I won’t provide you with the full forms or exact explanations of these terms, rather I shall try to make you learn the terms in a very easy way:

FY = foregone year or days gone by or in short previous year.

AY = evaluation year or gauging year.

See as per the accountancy a FY (previous year) starts from 1st of April and ends on 31st of March every year, then in most lay man’s term we all have to furnish our income details in the subsequent year called as AY (evaluation year), evaluation can only be done once we have made any earning in a given year, therefore always remember that FY shall always be one step behind from the AY.

For example if we are talking about our income for the year 2012 – 2013, then the FY start date would be 1st April, 2012 and its end date would be 31st March, 2013. Now whenever after 31st of March 2013 we file our ITR the AY for that ITR would be 2013 – 2014, meaning thereby that we are furnishing our income details which we made during the FY 1st April, 2012 to 31st March, 2013.

Hey!! Still not clear.

FY = First you earn, then AY = get your income evaluated.

5. I have filed my ITR electronically, now why I have to send the hard copy via post to Bangalore address?

It is a sort of notification to the Income Tax Department that you are through with the process of filing of return and all the data has been entered in the prescribed format and now they can start evaluation and processing the same at their end. Therefore, it is more like an acknowledgement to the department for the process of filling your ITR.

6. What dose ITR under scrutiny means?

‘Scrutiny’ means in another word ‘inspection’, meaning there by that whatever declaration etc you had provided to your CA or Financial Advisor or you yourself had mentioned in your ITR while submitting the same in the department, is under review and the department may come up and ask for any kind of proof to be produce in order to verify that whatever you have declared in that financial year was it correct or not.

This process of the Income Tax department is generally random, no specific person gets been targeted. Hence it’s always advisable to maintain all the supporting records of each financial years for which you are submitting your ITRs. Up till 7 years all records must be maintained, keeping the records electronically is better and less space consuming.

7. What dose ITR Refund means, can I get the same if I file my ITR?

It’s an amount received back from the Income tax department which you have already paid via tax to the government and you are claiming back some percentage out of it because as per the Income Tax Law you have fulfilled some of the criterion defined there to avail the tax benefits.

8. What do you mean by Income as per the Income Tax Law?

The word ‘Income’ is very broad and its meaning would be vast. In regard of a salaried person, all that is received from an employer in cash, kind or as a facility is considered as income. For a businessman, his net profits would constitute his income. Income can be from investments in the form of Interest, Dividend, and Commission etc. Under the Act, all incomes earned by persons are classified into 5 different heads, such as:

a. Income from Salary

b. Income from House property

c. Income from Business or Profession

d. Income from capital gains

e. Income from other sources

9. How much Tax am I liable to pay, how I will come to know about it?

For that you’ll have to review the Income Tax website:

http://law.incometaxindia.gov.in/DIT/Xtras/taxcalc.aspx or ask your CA or Tax Lawyer, they would be able to help you out.

10. I am a small time businessman; do I have to file my returns too?

Yes, if your business annual turn over is 10 lacs or above and your net profit is 1.20 lacs or above, then you are suppose to maintain the books and file an ITR for the same.

11. What do you mean by TDS?

It’s the tax which has been deducted out of total earning just at the source or disbursal or before transfer/paid in the account. You can review the details of the same in the form called as 26AS.

This way I, have tried to answer your some questions, there might be plenty of questions in your mind for which you are looking for logical answers, you can reach me via email pranabroychowdhury@gmail.com.  I’ll try to answer your concerns.

The above mentioned article is purely the author’s point of view his versions and understanding, readers are requested to refer the government websites, for further clarifications.

Pranab Roy Chowdhury

B.Com., MBL, LL.b

Advocate

Member: All India Federation of Tax Practitioners

Partner: M/s AP Associates Legal Consultant