Tax exemption to those with income up to Rs 5 lakh? No taxpayer can avail this?
NewFor instance, you were eligible for the exemption if you had reported the interest income from your savings bank account to your employer and tax had been duly deducted on that income. The CBDT had announced this at the end of June 2011, when most companies had already finished preparing the Form 16s of their employees.
Delhi, 5 Mar, 2012(ET BUREAU): The previous year, just a few weeks before the tax return deadline of 31 July, the Central Board of Direct Taxes (CBDT) exempted those with an income of up to Rs 5 lakh from filing returns. But, as ET Wealth pointed out, the conditions were so restrictive that no one was eligible for the exemption.
The CBDT has woken up early this year. Last month, it announced a similar exemption for the current financial year as well. But the conditions are no less impractical than they were in 2011.
No income from investments
The exemption is for salaried taxpayers who have income only from salary and the interest from their savings bank account. Surely, a person earning Rs 30,000-40,000 a month would have invested in fixed deposits, recurring deposits, bonds and other investments as well. This includes tax saving investments in NSCs, infrastructure bonds and tax saving fixed deposits.
If the taxpayer puts money in any of these options, he would also earn interest from these investments, which will disqualify him for the exemption from filing returns. Only a person who has no tax saving investments and lets all his money idle in a savings bank will be eligible.
Investors in property also won’t make the cut. If they have any rental income, they are not eligible. Even if their second house is lying vacant, they will have a notional income from the property.
Even if the taxpayer has no income other than his salary and the bank interest, there is a practical difficulty. The interest on a savings bank account is credited to the account on a half-yearly basis. The interest from October 2011 to March 2012 will get credited after 31 March. But since it accrued this year, tax will have to paid on it right now.
However, the CBDT says that to avail of exemption from filing his return, the taxpayer should have declared his bank interest to his employer. It should be mentioned in the Form 16 and tax should be deducted on it. To do this, the taxpayer will have to estimate the interest income on the basis of his bank balance in the past 5-6 months.