Dear Friends,




I have been asked often about the exemption given to salaried employees which was spelt out by our Hon’ble FM last month. To clarify your doubts, the details of exemption from filing Income Tax Returns are given below :-



1) Only those Individuals having total income (after allowable deductions) up to Rs.5,00,000 for FY 2010-11 are eligible.



2) The income should be Salary income from a single employer and may include interest income of Rs. 10,000/- from deposits in a saving bank account. However, the total (after allowing for deductions) should not exceed Rs. 5,00,000/-. Tax must be deducted (TDS) and paid and reflected in the Form 16 (Salary Certificate) of the assessee.



3) In the case of Bank Interest, such individuals must report their Permanent Account Number (PAN) and the entire income from bank interest to their employer so that it is mentioned in Form 16 (Salary Certificate) and pay entire tax by way of TDS on Salary.



Though well meaning, there are certain fine points which have been overlooked by many. If you take a closer look, the exemption/relief is not available in the following cases :-



a) In case of a job change during the financial year, an individual is still liable to file his returns even though he may have disclosed his earlier income details to his new employers.



b) Secondly, employees having income from house property, capital gains, income from other sources (other than from Bank Interest), etc. are not eligible and must file their returns.



c) Employees rarely give details of bank interest to their employers and strictly speaking, will not be eligible to claim the exemption since the bank interest details will not be included in their Form 16s. In such cases, they will have to file returns.



d) Also, in many companies, proof for availing tax deduction is collected by January end and therefore, payments eligible for tax deduction (e.g. Life insurance premia paid in February and March) are not included in Form 16. Certain other deductions viz., under section 80G (Gifts and donations) are claimed at the time of filing of the return. Therefore, such persons will have to compulsorily file their returns to claim refunds.



e) The exercise of computing income will have to be carried out simply to determine whether their taxable income (after deductions) is within the limit !



f) All non filers will have to maintain records to respond in case of issue of notices by the income tax department in the future. This means records will to be maintained.



g) Of course the above scheme is not applicable in cases, where scrutiny assessments, etc are under progress and notices have been issued.



So, again it appears that what the government has offered with one hand, it has taken away with the other. One can always point out that it would have been better had the government addressed the above issues before implementing such a half baked scheme. However, we must be satisfied with the “largesse” shown by the finance ministry and hope that this is a precursor to a more efficient tax regime.