Bye Bye Saral, Hello Clarity

The new income tax return forms, which replace the Saral forms, explain each and every section of the forms in detail, making them truly do-it-yourself guides for taxpayers

For one, the new income tax return (ITR) forms are more reader-friendly than the phased out Saral forms. Sure, they are lengthier than Saral but not as complicated. The Saral form was in very fine print, crowding 78 lines into a single page. As Finance Minister P. Chidambaram says, “You needed a magnifying glass and a keen eyesight to fill it up.”

The format is easier too. Saral was an omnibus form to be used by all types of taxpayers with all types of taxable income. It made no distinction between pensioners, stock market traders, salaried people, consultants, self-employed professionals, businessmen and part-time workers.

ITR 1 WHO IS IT FOR The plain vanilla form is for people with only salary, pension and interest income WHAT’S NEW IN IT Declaration of high-value financial transactions Form 16 details Details of tax-saving investments under Section 80C Details of any tax-free income ITR 2 WHO IS IT FOR Salaried people and pensioners who have other income (dividends and profits from mutual funds and shares, rental income, royalty) besides interest income WHAT’S NEW IN IT All the information required in ITR 1 Details of capital gains Details of set off and carry forward of losses Details of income from house property (address of the property, rental income and details about the tenant, though his PAN is optional) Details of income from other sources (sale proceeds of assets such as automobile, machinery) Details of income of spouse or minor child if it is to be included in your income ITR 3 WHO IS IT FOR Partners in a partnership firm WHAT’S NEW IN IT All the information required in ITR 1 and ITR2 Details of the taxpayers’ share in the partnership firm and other information about firm (such as its PAN and financial details) ITR 4 WHO IS IT FOR Proprietors of business and consultants WHAT’S NEW IN IT All the information required in ITR 1 and 2 Details of income if it is liable to tax audit (Rs 10 lakh profit/income or Rs 40 lakh turnover) Details of balance sheet—profit and loss, creditors, debtors, cash balance

In the new scheme of things, taxpayers are categorised into eight different categories on the basis of the type of taxable income. Each category has to use a different form (see graphic).

Choose how you want to file

Submit the return in paper form Submit the return electronically under digital signature If you don’t have a digital signature, file data online and submit verification in Form ITR-V Submit a bar-coded paper return These forms do not have to be filed in duplicate. Returns filed on paper have to be submitted with an acknowledgment slip, which is stamped and returned to the taxpayer. However, if you file electronically without a digital signature you have to submit two copies of Form ITR-V.

Also, being lengthy doesn’t always mean being complicated. Saral pushed everything under one umbrella. Which also meant that your tax return form had confusing sections on capital gains and income from house property even though you never dabbled in shares or mutual funds and were not lucky enough to own a house, leave alone rent it out. Since they are specific to the kind of taxable income, the new forms do not have such anomalies.

Saral’s major shortcoming was that it clubbed a lot of the entries without fully explaining how to go about filling them. For instance, the capital gains section in the form did not have a separate entry on setting off capital losses or carrying them forward. Such a simplistic approach is completely out of sync with reality in these times of increased investment in stocks or other assets that result in capital gains or losses. The new forms have a detailed section on capital gains and losses which simplifies matters for taxpayers.

If taxpayers still feel intimidated by the elaborate entries, there is help at hand. The Income Tax Department has authorised some 3,700

Tax Return Preparers (see box) to fill up income tax return forms for individuals and file them. “Our tax laws may need to be simplified but our tax return forms are among the simplest in the world,” Chidambaram told the first batch of Tax Return Preparers (TRPs) at their convocation last month.

HELPING HANDS One common reason for people not filing their income tax return is that they don’t know how to do it. Now a new initiative by the Finance Ministry can get over this hurdle. The Income Tax Department has authorised some 3,700 Tax Return Preparers (TRPs) to fill up income tax return forms for individuals and file them. The TRPs have been trained and certified by the Central Board of Direct Taxes (CBDTt) and NIIT and will do everything from computing your tax liability to filling up the form, even filing your return for you. All this for a fee of up to Rs 250. That’s a small price to pay for peace of mind. What’s in it for the CBDT? More people in the tax net, better tax compliance and correctly filled forms. By helping people file tax returns, TRPs would help increase income tax revenues. To meet this noble objective, the CBDT is even willing to give them a slice of the collection pie. The slice is thicker in case of new assesses (3 per cent of the tax collected). This drops to 2 per cent in the second year and then to 1 per cent in the third year. That’s over and above the Rs 200-250 a TRP gets from the taxpayer. But there is a bigger role for TRPs than filling up forms. As Finance Minister P. Chidambaram points out, there is tremendous scope for this “extended arm of the CBDT” to offer financial and investment advice to taxpayers. He says TRPs will soon be in great demand from insurance companies, mutual funds and banks who would want them to peddle their products through these tax preparers. Where can you find a TRP? Simple. Log on to www.trpscheme.com or call toll-free numbers (18001806448 (MTNL/BSNL) or 18001026448 (Airtel) to get their contact details. So, don’t wait till July 31 to file your tax return. Just get a TRP to do it right away. -By Rajshree Kukreti

You may not even need a TRP’s help because the new tax forms are really “do-it-yourself” guides. The reader-friendly instructions that come with them explain how every entry in the tax form has to be filled up, unravel the alphabet soup of different sections and even tell you how to calculate your tax liability. Saral too came with instructions but the emphasis on keeping them short meant they were neither clear nor comprehensive.

PICTURE SPEAK

Our tax laws may need to be simplified but our tax return forms are among the simplest in the world. P. CHIDAMBARAM, FINANCE MINISTER

The best thing about the new ITRs is that they can be filed online. That also means no more attaching documents—Form 16s, TDS certificates, proofs of investments and school fee receipts—with your tax return. The flipside: more work for salaried people who now have to fill up the Form 16 details themselves. But then, the ease of filing returns from the comfort of your home more than makes up for that additional work.

In the years to come, e-filing would become a norm. The IT Department needs to ensure that its website is able to handle the increased load. Also, it needs to process returns quickly and remit refunds through ECs directly to taxpayers’ bank accounts. That would curb the corruption and hassles faced by honest taxpayers as they wait for the excess money they paid in tax to come back to them.

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