- Amendment in Section 195 of the Income Tax Act, 1961
- Section 195 of the Act relates to levy of tax deduction at source (TOS) on any sum chargeable to tax and which is paid to a non-resident, not being a company, or to a foreign company. Prior to the amendment, sub-section (2) of the said section provided that where the person responsible for paying such sum chargeable under the Act to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the Assessing Officer to determine, by general or special order, the appropriate of such sum so chargeable and upon such determination, tax shall be deducted only on that proportion of the sum which is so chargeable.
- However, no format was prescribed for making the application under sub-section (2) of section 195. Therefore, the deductor has to write an application on plain paper and physically submit it to the Assessing Officer. The AO then issues a certificate determining by general or special order, the appropriate proportion of such sum so chargeable to tax at source under section (1) of section 195 of the Act, and there are also no standard operating procedures in respect of processing and disposal of the application under the said sub-section. This increases uncertainty and causes inconvenience to deductors.
- Further, sub-section (7) of section 195 also provided that the Government may specify a class of persons or cases, where the deductor who is responsible for paying to a non-resident. Not being a company, or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall make an application to the Assessing Officer to determine. by general or special order, the appropriate proportion of sum chargeable, and upon such determination, tax shall be deducted under sub-section (I) on that proportion of the sum which is so chargeable. However, no format was prescribed for making such application and neither is any standard operating procedures specified in respect of processing and disposal of the application. There was a demand from various stakeholders to streamline the process of passing of such orders under section 195(2) of the Act.
- ITR-1 AMENDMENTS
From this year, those filing ITR1 will have to provide the Tax Deduction Account number (TAN) of the employer, mandatory if tax is deducted. Other details required are name, nature, address of the employer.
According to the notified form, these details will be pre-filled automatically, once TAN of the employer is filled by the taxpayer in ITR-1. You can find the employer’s TAN details in your Form-16.
It is mandatory for your employer to give you Form-16 if tax is deducted
- Eligibility criteria for ITR-1 restored.
- The CBDT had put certain restrictions on who could file tax returns using ITR-1 for FY 2019-20. In its notification issued on Janaury 3, it stated that ITR-1 could not be used by individuals who own single house property that is jointly owned or fulfilled one of the conditions in the seventh proviso of 139(1).
- The seventh proviso of 139(1) refers to those individuals who have incurred expenses of Rs 2 lakh or more for travel to foreign country either on himself or any other person or individuals who have deposited more than Rs 1 crore in one or more current accounts or/and paid electricity bill of more than Rs 1 lakh in FY2019-20.
- However, the tax department rolled back the restrictions it announced. According to press release dated January 9, 2020, the income tax department said that concerns raised for the changes in ITR-1 are likely to cause hardships to individual taxpayers as such taxpayers would require to file detailed ITR form if they own a house property jointly or satisfy any conditions of the seventh proviso of 139(1). Therefore, to avoid such hardships to the taxpayers, the department has allowed such individual.
- The ITR-1 can be filed by a resident individual whose total income does not exceed Rs 50 lakh and is not either director in a company, or has invested in unlisted equity shares. Further, the sources of income should be from salary, single house property, interest income, family pension etc.
- Who can file tax return using ITR1 for FY 2019-20:
As per the notified forms and latest clarification from the income tax department, ITR1 can be used by the following individuals:
- Resident individuals whose total income does not exceed Rs 50 lakh;
- Sources of income should be salary, house property, interest income, family pension etc.
- Individuals who have spent more than Rs 2 lakh on foreign travel on himself/herself or any other person in FY 2019-20;
- Individuals who have deposited more than Rs 1 crore in one or more current account in FY 2019-20;
- Individuals who have paid more than Rs 1 lakh as electricity bill in FY 2019-20;
- Individuals having one house property irrespective of ownership status, i.e., single house property either owned fully or jointly with someone.
- Who cannot file tax-return using ITR1 for FY 2019-20
CBDT is yet to notify the ITR forms for individuals who are not eligible for ITR-1. However, after the roll-back, it seems the eligibility condition for ITR-1 of FY 2019-20 is the same as that for the previous year.
- Individuals who are non-resident or not ordinarily resident. The income tax law applicable for the individual is based on the residency condition satisfied by him/her
- Resident individuals whose total income exceeds Rs 50 lakh;
- Individuals who have incurred capital gains- either short-term or long-term or both;
- Individuals who are directors in a company;
- Individuals who have invested in unlisted equity share.
- Individuals who have to carry forward losses under the head ‘Income from house property’;
- Individuals who have more than one house property;
- Individuals having sources of income other than interest like dividend income.