Salaried employees — when no return is required ?

QUESTION: There has been news item about a new scheme sparing liability for salaried employees with income below Rs.5 lakhs, subject to certain conditions which are not clear for them. Could you clarify the same?

ANSWER: Notification No. 36/2011 dated 23rd June, 2011 would exempt salaried employees, whose income does not exceed Rs.5 lakhs in cases where the only other income for them is by way of interest from savings account not exceeding Rs.10,000. Salaried employees drawing income upto Rs.5 lakhs are likely to have other incomes from deposits other than from savings bank account including income from those classes of investments for which deduction is available under section 80C. Only an extremely limited number of taxpayers would be able to take advantage of the scheme.

It is necessary to bear in mind that for employees to be able to avail the benefit, they have to ensure that there is not only adequate tax deduction at source, but also such tax has been deposited by the employer and so certified in Form 16, which should contain employee’s Permanent Account Number (PAN), details of income, tax deducted at source and deposited to the credit of the Central Government. Tax deduction and deposit should cover the entire tax payable. If there is any claim of refund of over-paid taxes, the need for return is not avoided. For the employees, who have served more than one employer during the year, the scheme would not be applicable.

It is further made clear, that the scheme would have no application, where return is required by a notice for assessment under section 142(1), for reassessment under section 148 or on a searched person under section 153A or on a third party to search, where documents or assets relating to the assessee has been discovered under section 153C.

There was no need to impose so many restrictions, which go against the spirit of the policy announced by the Finance Minister in his Budget Speech. The exemption should have been granted to all salaried employees and senior citizens, who have income from sources other than business or profession or capital gains, upto Rs.5 lakhs as long as adequate tax has been either deducted or paid by way of advance tax, subject, no doubt, to enquiry by the Assessing Officer, when so required. Such a course of action would not only help a large number of small taxpayers, but also reduce the proliferation of paper work in the Income-tax Department.

Source : The  Hindu July 18, 2011