Tax Procedures

Filing of Returns

Under the provisions of the Income Tax Act, tax payers are required to file their returns of income for the assessment year 1994-95 and subsequent years on or before the dates mentioned below:-

1. Where the assesses is a company, the 30th day of November of the assessment year;
2. Where the assessee is a person,  other than  a company-

i. in a case where the accounts of the assessee are required under the IT. Act or any other

law to be audited or where the report of an account­ant is required to be furnished under

section 80HHC or section 80HHD or where the pre­scribed certificate is required to be

furnished under section 80R, 80RR or section 80RRA or in the case of a cooperative

society, the 31st day of October of the assessment year;

ii.     in a case where the total income includes any income from business or profession, and

there is no requirement of getting the accounts compulsorily audited or of furnishing a

report or certifi­cate as mentioned in (i) above, the 31st day of August of the assessment

year;

iii.    in any other case, the 30th day of June of the assessment year.

 

Consequence  of Default of Delay

Delay in furnishing the return attacts charge of interest at the rate of 1.5 percent, for every month or part of a month for the period of dealy on the amount of tax found due on the proceesing of return or on regular assessment (refer para 13.6) after giving credit for advance tax and tax deducted at source. In case of
failure to file the return such interest is to be calcuted upto the date of best judgement assessment under sec.144.

A person liable to tax is required to file a return of income with the Assessing Officer having jurisdiction over his case. The return forms for the purpose can be obtained from any Income Tax Office or from a specified Post Office. The assessee before filing the return is expected to compute the tax on his returned income by way of self-assessment and if there is any additional liability of tax, the assessee is required to pay  the same. The unpaid tax if any is recovered according to the procedure specified in the Act.

For the convenience of non-residents liable to Indian Income Tax, Non -residents Circles have been created in big cities namely, Bombay, Delhi, Calcutta, Madras, Cochin and Ahmedabad. Any person who is a non-resident and has not yet been assessed to tax any where in India, may file his income tax return in any of the above mentioned Non-resident Circles. However, once he files return in any of these Circles, Jurisdiction
over his case will continue to be with circle unless it is change under orders of the appropriate authority.

Payment of Tax prior to filing of return 

Advance Tax

Tax payers whose total income is likely to be chargeable to tax for the assessment year are required to pay tax in advance during the financial year (April 1 to March 31) on their estimated current income, which will be assessable to tax during the next following financial year called assessment year. The cureent  income for this purpose means the total income which will be chargeable to tax in the relevant assessment year. The advance tax is payable in instalments as follows :-

Due date of instalment	Amount payable
A.   For companies
i)    On or before the 15th June	Not less than fifteen per cent of total advance tax.
ii)   On or before the 15th Sept.	Not less than forty five percent of total advance tax as reduced by the amount, if any, paid in the earlier instalment.
iii)   On or before the 15th Dec.	Not less than seventy five percent of total advance tax as reduced by the amount if any, paid in the earlier instalments.
iv) On or before the 15th March	The whole amount of such advance tax as reduced by the amount or amounts, if any, paid in the earlier in­stalment or instalments.
B.   For Non-Corporate Assessees
i)    On or before the 15th Sept.	Not less than thirty percent of such advance tax.
ii)   On or before the 15th Dec.	Not less than sixty percent of such advance tax as reduced by the amount, if any, paid in the earlier instalment.
iii) On or before the 15th March	The whole amount of advance tax as reduced by the amount or amounts, if any, paid in the earlier instalement or instalments.

 

The advance tax payable is the tax on the current income minus the tax deductible at source or collectible out of any income  included  in the current income. The provisions for advance tax are not applicable where the tax payable for the assessment year is less than Rs. 5000/-

If the tax payer does not make payment of advance tax voluntarily, the assessing officer can issue a notice at any time during the financial year, but not later than the last day of February asking him to pay the advance tax in specified instalments. Such notice is ordinarily based on the assessed income of the tax payer for the latest year. The assessee in that case has an option to pay advance tax on the basis of his own estimate if he considers that his current income during the relevant accounting period would be less than the income on the basis of which advance tax has been demanded from him. The assessing officer can modify his notice of demand in certain circumstances. Similarly,  the assessee can also  revise  his estimate any number of times and after adjusting the amount already paid, if any, pay the balance in instalments falling due after the revised estimate.

Consequence of Deferment/Short Payment

Default in making payment as per the instalment plan mentioned in para 13.2 attracts conequence in the form of charge of interest for deferment at the rate of 1.5% per month for 3 months on the amount of shortfall from the required percentage in the instalments due on 15th June, 15th September and 15th December. If the advance tax paid upto the last instalment, i.e. 15th March falls short of the tax payable as per the return of income, interest @ 1.5% is payable on the amount of shortfall calculated from the date.

In case of failure to pay the advance tax or in case of shortfall in such payment in relation to 90% of the assessed tax, a further interest at the rate of 1.5 percent per month of part of month is chargeable from First April of the assessment year to the date of processing of return or the regular assessment on the amount falling short of the assessed tax.

Deduction of Tax At Source

Person responsible for paying any income chargeable to tax under the head 'Salaries' is required to compute the tax liability in respect of such income and deduct tax at source at the time of payment. If the employee has any other income he can inform the employer in which case the employer can take that income into consideration for computing his tax liability. He will not take account of loss except loss from house property.

Those responsible for paying any income by way of interest on securities or any other interest are required to deduct tax at source at the prescribed rates at the time of credit of such income to the account of the payee or at the time of payment thereof by any mode. W.e.f. 01.07.1995 interest on term deposits with banks is also subject to such deduction.

Tax is also duductible at source in respect of following income at the rates noted against each-

(i) Winnings from lottery or crossword puzzle (on amount exceeding Rs. 5,000/-)	Rates in force
(ii) Winning from horse race (on amount exceeding Rs. 2,500/-)	Rates in Force
(iii) Payment to contractors and sub contractors (on amount exceeding Rs. 20,000/-)
a)      Advertising	1%
b)      Others	2% to Contractors; 1% to sub-contractors
(iv) Insuracne Commission	Rates in force.
(v) Payment to non-resident Sportsman or Sports Association	10%
(vi) Payment on repayment of Deposits under N.S.S. (on amount exceeding Rs. 2,500/-)	20%
(vii)Payment on repurchse of Units	20%
(viii) Commission on sale of lottery tickets	10%
(ix) Rent (on amount exceeding Rs. 1,20,000/-	1.5% if payee is individual of HUF; 20% in other cases.
(x) Fees for professional or technical services (on amount exceeding Rs. 20,000/-)	5%

Deduction is required to be made only if the payer is a person other than individual or HUF

Tax Collection at Source

In certain cases tax is to be collected at source from the buyer, by the seller at the point of sale. Such tax collection is to be made by the seller at the time of debiting the amount payable ijf the buyer to the account of the buyer or at the time of receipt such amount from the said buyer, whichever is earlier. Such of cases and the rate of collection of Tax at Source are as follows:—

S.No.	Nature of Goods	Percentage of collection of tax
(a)	Alcoholic liquor for human consumption (other than Indian made foreign liquor)	15%
(b)	Timber obtained under a forest lease	15%
(c)	Timber obtained by any mode other than under a forest lease	5%
(d)	Any other product not being timber	15%

 

Self Assessment

Where the tax deducted at source and the advance tax paid in respect of the income assessable to tax for any assessment year falls short of the tax chargeable on such income, the balance tax liability represented by the shortfall aforesaid is required to be paid by the tax payer on the basis of self assessment before he furnishes the return of his income to the assessing officer. Documentary proof of the payment of tax on self assessment has to be furnished along with the return.

Credit for Pre-assessment Taxes

Any pre-paid taxes i.e. the tax deducted or collected at source, taxes paid by way of advance tax and tax on self assessment in respect of the income of any year, is credited to the tax payer at the time of determination of tax liability by assessment or processing of return and if the amount of such pre-paid taxes exceeds the tax determined to be payable by assessment or processing the excess amount is refunded to the tax payer. Where any tax is demanded after adjustment of prepaid taxes by the assessing officer, it is payable within 30 days of the service of the demand notice, or even before, if so directed by the Assessing Officer.

Procedure for Determination of Tax liability

Processing of returns

Every return received in the office of the assessing officer is, processed to work out the tax and interest payable or refundable on the basis of the return. In case any tax or interest is found due, the same is intimated to the assessee for making payment. If the pre-assessment taxes are found to be in excess of the liability the excess amount is refunded.

Regular Assessments

(a)     Assessments after scrutiny

After processing of returns, the assessing officer may, for the purpose of ensuring that the assessee has not understand the income, require the assessee to produce evidence to support the facts stated in the return of income. He then determines the total income by an order in writing after taking into account all relevant material produced before him by the assessee or gathered by him and work out the tax liability on such income. Procedure also exists for obtaining an advance ruling from the Authority for Advance Ruling in relation to a transaction undertaken or proposed to be undertaken by or with a non-resident (para 6.8). Advance ruling can be obained by certain notified residents even in relation to a question arising in the assessment/appeal.

(b)      Best judgement assessments

If a person fails to make a return voluntarily or when ordered to do so by the assessing officer or, if he fails to comply with the directions in the matter of substantiating the return of income, the assessing officer may assess the total income to the best of his judgement on the basis  of available information and enquiry made by him. Such assessments are commonly known as 'Ex-parte^' assessments.

Reopening of Assessment

Where no return of income has been made or where after processing the return or completing the regular assessment, the assessing officer comes to hold the belief that some income has escaped assessment, he can reopen the assessments and, after going through all the process of regular assessment, complete a fresh assessment. Such reopening is, however, permissible only upto a period of ten years after the end of the assessment year.

Penalties 

Penalties can be levied for various defaults like:

1. Failure to furnish return of income 
2. Failure to keep or maintain books of accounts (Para 4.4.7)
3. Failure to get accounts audited (Para 4.4.8)
4. Concealment  of  income  or furnishing  inaccurate particulars of income
5. Not furnishing information required to make the tax assessment.
6. Failure to pay the tax within prescribed time. 
7. Failure to deduct tax at source.

Prosecution

There are provisions for prosecution for certain types of. offences such as :-

1. Evasion of tax 
2. Failure to file return in time
3. Making false statement before IT. authorities
4. Failure to produce accounts and documents called for
5. Failure to deposit the tax deducted/collected at source in government account.

Rates of income tax (for the Assessment Year 1998-99 and 1999-2000)

Rates of income tax are as under:

i)    Individual, including Hindu Undivided Family and Association of Persons

Income slab	Rate for 1998-99	Income slab	Rate for and from 1999-2000
First Rs.40,000	Nil	First Rs.50,000	Nil
Rs. 40,001-60,000	10%	Rs. 50,001-60,000	10%
Rs. 60,001-1,50,000	20%	Rs. 60,001-1,50,000	20%
Above Rs.1,50,000	30%	Above Rs. 1,50,000	30%

 There will be a surcharge @ 10% of tax for the assessment year 2000-01 and 10 and 15% for 2001-02 on specified slabs.

ii)       Partnership Firm

The whole of the total income as computed under the Act is taxed at 35%. Surcharge is leviable @ 10% from assessment year 2000-01.

iii)      Companies

For the purpose of corporate taxation, companies are classified as 'domestic companies^' and 'foreign companies'. A domestic company means an Indian company or any other company which has made the prescribed arrangements for declaration and payment of dividends within India. A 'foreign company^', means any corporate body incorporated under the law of any other country which is not a domestic company as it has not made the prescribed arrangements for declaration and payment of dividend within India.

From the assessment year 1998-99, domestic companies are taxable at 35% and foreign companies at 48%. For and from a year 2000-2001 tax on domestic companies is to be increased by a sur-charge of 10% of the tax.

In addition to tax at the rate mentioned above, a domestic company is liable to an additional tax called tax on distributed profits at the rate of 20% in respect of dividends, declared distributed or paid, after 1.6.1977.