The date of filing income tax returns by Individuals is couple of months away but this does not mean that one should wait for the last date for filing their returns. The filing should be done as soon as all the required information are gathered at one place such as Form 16, Investment Certificates, Bank Statements, TDS Certificate aka Form 26AS etc. But before moving ahead with Filing one should know the changes made in ITR 1 for Financial year 2017-18 aka Assessment Year 2018-19.
Changes in ITR 1 for FY 2017-18 aka AY 2018-19
Individuals who are Indian resident having income up to Rs.50 lakhs only by way of salary, one house property and income from other sources can file ITR 1. Till last year ITR 1 used to be filed by residents as well as non-residents but from this year ITR 1 is to be filed only by Resident Individuals and for Non-residents and not ordinarily residents ITR 2 is to be used.
Breakup/Details of Income from Salary
One of the major changes in the ITR 1 is the requirement of additional details of income of salary. Till last year only net income from salary was needed but now full bifurcation of the income from salary is to be filled in the income tax return.
Following bifurcation is to be filled in the ITR 1:
1 Basic Salary
Taxpayer has to fill in the figure of basic salary excluding all allowances, perquisites and profit in lieu of salary
2 Taxable Allowances
Not all the allowances are tax free such as medical reimbursements are exempt tune to Rs. 15,000, similarly transportation allowance is taxable above Rs.1600 per month i.e. Rs. 19,200 per annum. Another popular allowance i.e. House Rent Allowance is exempt up to certain limit based on fulfillment of certain conditions. Apart from the above stated allowances there are few other allowances which are fully taxable or are taxable above prescribed limit such as Leave travel allowance, Children Education Allowance, Hostel Allowances etc.
Read: All about Allowances
Perquisites means the benefits an employee enjoys being on their job or designation such as rent-free or concessional rent accommodation provided by employer, sweat equity shares at concessional rate etc. Not all the perquisites are taxable, for instance, if your employer provide you rent-free accommodation then a certain percentage range from 7.5% to 15% of your salary based on the working location is added to your taxable salary. Similarly, in case the employee is given some ESOP then the value of the perquisites are calculated by deducting the amount paid by the employee from the fair market value of the shares on the date of exercising of the option.
4 Profit in lieu of salary
Section 17 of the Income Tax Act says that any extra benefits in cash or kind received by the employee in addition to the salary or wages is termed as Profit in lieu on salary and will be taxed accordingly. For example, retrenchment benefits etc.
5 Deductions under section 16
Section 16 permits a certain types of deductions from the salary income only. For FY 2017-18 the deductions under section 16 is entertainment tax which is the lower of the a) Actual amount received, b) 1/5th of the basic salary or c) Rs. 5,000. And any professional or employment taxes paid during the year.
Breakup/Details of House Income
Similar to the income from salary, breakup of the income from one house property is also required to be filled in ITR 1 from FY 2017-18. Till last year only income earned from house property was needed but now breakup of the same is required to be filled.
The taxpayer is required to choose whether the house property is self-occupied, let-out or deemed let-out. In case the house property is self-occupied then annual value is taken as zero and taxpayer can claim the deduction of the interest payment made towards the home loan. The maximum deduction on such home loan interest payment is allowed up to Rs.2 lakhs.
In case the house property is deemed let out i.e. neither self-occupied and let-out, then also the income from house property is chargeable to tax and taxpayer is required to pay tax on deemed rent i.e. rent the taxpayer can earn if the house property would have been let-out.
In case the house property is let-out the taxable value is arrived by deducting the municipal taxed paid from the rent receivable.
i) Gross rent received/ receivable/ lettable value
Taxpayer needs to fill the actual amount received as rent in the financial year 2017-18.
In case if deemed rent, highest of the three is taken for step 1: a) Rent received or receivable, b) Fair Market Value and c) Municipal valuation to arrive at lettable value.
ii) Tax paid to local authorities
Taxes paid on the actual basis shall be deducted from the rent received.
iii) Annual Value (i – ii)
Annual Value is arrived by deducting the house taxed paid from the rent received during the year.
iv) 30% of Annual Value
Standard deduction of 30% is allowed to be deducted from annual value. This 30% is towards the maintenance expenses but it is restricted to 30% of the annual value, no actual expenses can be claimed.
v) Interest payable on borrowed capital
The last deduction is towards the interest payment made on home loan. The maximum deduction is restricted to Rs.2 lakhs.
The amount derived after standard deduction and interest deduction is chargeable to tax.
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Late filing Penalty under section 234F
With effect from 1st April 2018, taxpayer will be penalized for filing tax return beyond the due date under section 234F. The due date under section 139(1) for filing income tax return is 31st July of the following year but in case taxpayers fails to file the return on time then following penalty shall be leviable:
- 5,000, if the return is filed after 31st July but before 31st December of the following year for example due date of filing of return for the assessment year 2018-19 is 31st July 2018. So if taxpayer files return after 31st July 2018 but before 31st December 2018 then penalty of Rs. 5,000 will be leived.
- 10,000 if the return is filed after 31st December.
- If the total taxable income is up to Rs.5 lakhs, then the penalty under section 234F is restricted to Rs. 1,000.
Please note the last date for filing return for financial year 2017-18 with penalty is 31st March, 2019. Taxpayer in no case can file return after this date and the return filed within 31st March 2019 is allowed to be revised under section 139(5) till 31st March, 2018.
Cash Deposited Removed/Bank Details
The column added for the last financial year for disclosing the cash deposited during the period 09.11.2016 to 30.12.2016 has been done away with in ITR 1 for FY 2017-18.