The Hindu Business Line : A quick guide to the new I-T forms

Assessees, both corporate and non-corporate, who have already filed return of income for assessment year 2006-07 but yet to file fringe benefit tax return, have to use Form 3B.

Recently, the Central Board of Direct Taxes (CBDT) notified new forms for filing returns of income and fringe benefits. These forms are applicable for the assessment year (AY) 2006-07 and have already come into effect. The forms have substituted the existing Form Nos 1, 2 and 3. One definite relief to non-corporate taxpayers is the message that the new forms are optional and Form 2D can be used for the current assessment year. In respect of fringe benefit returns, the CBDT, on July 24, notified Form 3B and has extended the time limit for filing FBT (fringe benefit tax) returns to October 31.

The applicability of the new forms notified is as follows:

Form 1: For companies, and it is mandatory for AY 2006-07. It is a return of income cum fringe benefits.

Form 2: For non-corporate assessees having income from business or profession, and it is optional for AY 2006-07. It is a return of income cum fringe benefits.

Form 3: For non-corporate assessees not having income from business or profession. It is optional for AY 2006-07.

Form 3B: FBT return applicable for AY 2006-07.

Usage of forms

Assessees (both corporate and non-corporate) who have already filed return of income for AY 2006-07 but who have to file FBT return, have to use Form 3B.

In the case of non-corporate assessees who have not filed return of income so far but having income from business or profession may use either Form 2D or the new Form 2. In case they file their return in Form 2D, then FBT return in Form 3B is to be filed separately. If the taxpayer proposes to use new Form 2, then FBT return in Form 3B need not be filed separately as the (new) Form 2 is a return of income cum fringe benefits.

In the case of assessees (non-corporate) not having income from business or profession, they can continue to file the return of income in Form 2D, 2E or 2F or in the new Form 3. For corporate assessees, it is mandatory that the return of income and FBT combined in Form 1 is filed for the AY 2006-07, if the return is filed on or after July 24.

Contents of the forms

Form 1, meant for corporate assesses, has three parts. Part A deals with general details and formatted balance-sheet and profit and loss account. In the case of assessees not liable for audit under Section 44AB, furnishing of certain details is optional. Where the accounts are liable for audit under the Section, the required information has to be furnished compulsorily and the sequence of information is similar to that for tax audit given in Form 3CD.

Part B deals with computation of income. And Part C with computation of fringe benefits and tax thereon. There are 25 supporting schedules containing elaborately all the heads of income (excluding salary), details for computation of depreciation, computation of income under Section 115 JB, valuation of fringe benefits, advance tax and other particulars.

Form 2, meant for non-corporate assessees having income from business or profession, is similar to Form 1 in many aspects. The differences pertain to (a) salary income; (b) clubbing of income of other persons; (c) book profit under Section 115 JB; (d) tax on distributed profits applicable for domestic companies; (e) cash flow statement; (f) dividend distribution tax details; and (g) TDS in respect of salary income.

Form 3 is applicable to assessees not having income from business or profession and contains details to be furnished in respect of incomes and does not deal with FBT. Obviously, assessees not having income from business or profession, have no FBT liability.

Form 3B is a return of fringe benefits to be used by non-corporate assessees who desire to file their return of income in Form 2D for the AY 2006-07. It is also applicable for corporates who have furnished their return of income before July 24.

Procedure

Taxpayers filing returns in any of the new forms have the option to either file in paper mode or by electronic mode first and thereafter furnish the paper return mentioning therein the acknowledgement number given for the electronic return. For furnishing in electronic mode, no digital signature is required and it is to be done by visiting the web site http://www.incometaxindiaefiling.gov.in.

For corporate taxpayers, Form 1 is mandatory where the return is filed on or after July 24 and it must be furnished electronically first and thereafter the paper return is to be filed, mentioning the acknowledgement number given for the electronic return.

Enclosures

While furnishing in electronic mode or paper form, no enclosures are allowed. The details of advance tax, self-assessment tax, TDS or TCS, statement of computation of income, including audit reports and certificates, should not be enclosed with the return of income. However, while furnishing the details in the return, taxpayers must take sufficient care to comply with the provisions of law.

The instructions on the forms say that all documents and evidences for the computation of income and audit reports have to be retained by the assessee for verification by the income-tax authorities, as and when necessary.

The cash-flow statement for non-corporate assessees given in Forms 2 and 3 is optional. If this information is made mandatory in the future, then it would be very difficult for the taxpayers to furnish the details. In the case of companies which have furnished their return of income already, the newly introduced Form 1 will have no impact but the return of fringe benefit has to be furnished in Form 3B. FBT returns can be furnished either in paper form or by electronic mode first and thereafter in paper form by the corporates too.

Issues

As per the instructions, the sequence for filing returns is electronic followed by paper mode. If a taxpayer submits his return in electronic form before the "due date" under Section 139(1) and furnishes paper return after the "due date", whether his return will be taken as furnished under Section 139(1) or Section 139(4) requires clarification.

In respect of income under the head capital gains, the taxpayer is not required to furnish the description of the capital asset transferred and also the date of acquisition. If the income-tax authorities desire to verify the correctness of information, it can be done only by having an interface with the taxpayer.

Dispensing with the requirement of enclosures for paper return may result in tax officials having to engage themselves in large-scale verification, by visiting assessees' premises and so on. Thus could lead to a sort of Inspector Raj in tax administration. Alternatively, Section 143(1) may have to be amended to enable income-tax officials to seek specific information for evaluating the tax returns filed by the assessees.

The return forms notified are exhaustive and comprehensive. However, taxpayers would be relieved that they have been given the freedom to file returns using Form 2D or the new forms in paper/electronic mode for the present.

If the tax administrators want to make electronic filing mandatory, then the return forms require some simplification and enclosures must be admitted along with the paper returns. This would provide completeness of information and definite evidence for objective appraisal of tax returns in the long run.

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