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A company had filed its return for assessment year 2020-21 declaring a positive income and paid taxes on it and also carried forward long-term losses from previous year. Now it has realised that it forgot to declare certain long-term gains of assessment year 2020-21. This income, now to be shown under capital gains, is less than the carried forward losses. Can it now file ITR-U for the same even though there is going to be no additional tax payable?
Please also comment on section 119 of the Act if that is an option.
Anil Bagai
Updated return is an option provided to the taxpayers whereby they are given an opportunity to rectify any mistakes or omissions made while filing the original return. An updated return is permitted to be filed once per assessment year and the time limit is within 2 years from the end of the assessment year. Reduction in carry forward of losses is one of the reasons for which an updated return can be filed. In this scenario, the company would be eligible to file an updated return as it is to reduce carry forward losses, even though there is no additional tax payable.
Section 119 would not be applicable for the company as there is no delay in claim of refund or of carry forward of losses.
If a person works in a full-time job for 5 months in a financial year and earns ₹12 lakh and as a freelancer for the remaining 7 months (earning business income as retainer) with income of ₹10 lakh, how is tax liability calculated? In addition, there is rental income of ₹3.5 lakh.
Kumar
An individual has to pay tax on the total income earned during the year at the applicable tax slab rates.
Total income would include income from various heads, such as income from salary, house property, business income etc. There are specific methodologies for computing income under each of the heads. For example, while computing business income as retainer fees due to freelancing, expenditure incurred for earning the income can be claimed as a deduction.
When it comes to house property, there is a standard deduction for repair and maintenance at 30 per cent of the net rental value. Deductions such as local taxes (property tax, water/municipal tax) paid during the year and interest paid on loan taken for purchase/construction of the house property are considered while arriving at the taxable income.
Similarly, on salary income, the individual can claim exemption for specific expenditure; rental expenditure can be claimed as a deduction on house rent allowance, leave travel allowance for personal travel undertaken within India, etc.
In addition to the above, an individual can also claim deductions under Chapter VI A (deduction under Section 80C in respect of insurance premium, contribution to Provident Fund, principal repayment on housing loan, tuition fees paid to school for children’s education, 80D for medical insurance premium, etc.) upon making eligible payments/investments.
Tax on total income computed as above will be subject to tax at the following slab rates:
However, an individual opting for the simplified tax regime is not eligible to claim exemptions/deductions from salary income (standard deduction, professional tax, house rent allowance, leave travel allowance), from rental income (interest on home loan), and deductions under Chapter VI A (Sections 80C, 80D, 80E, 80TTA, etc).
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