Decoding Tax Jargon through March Ending

Kamal Baruah *

“The hardest thing in the world to understand is the income tax” - Albert Einstein.

As March ending is near, RBI instructs its designated banks to make special arrangement to do government transaction. Even RTGS, NEFT and Govt payments are paid till midnight on March 31. I have had the privilege of working with SBI.

The memories of innumerable bills from Treasury at the midnight hours made us restless. Yet we cannot merely give up and succumb to despair. We do complete our task from bill payments for contractors / officials / departments to collection of various taxes for the Government of India.

India levies taxes on people through Indirect and Direct Tax to enhance the country’s economy. Tax is an obligatory contribution for citizen to the state revenue. Indirect Taxes are part of everyday life as consumers pay taxes on food, clothing and all consumable products by means of Sales, Service, Customs, Excise, VAT and GST.

Government don’t have to wait for a business to generate a profit to collect a tax since Digital India boosts its popularity for ease of any online transaction.

Hidden taxes are indirectly assessed on consumer goods without the explicitly knowledge of consumers and that is going unnoticed. But in case of Direct Tax like Income, Capital Gains, Securities Transaction, Perquisite, Corporate Tax, assesses got annoyed over huge sums of taxes and they avoid paying taxes or hiding income.

Arab countries have been for long a destination for Indians who wanted to make money and send it back to support their families. There are rising number of foreign workers in the Middle East as countries like UAE, Oman, Bahrain, Qatar, Saudi Arabia, Kuwait and Brunei in Asia offer lucrative career and its earnings are income-tax free.

Arab world generates revenue from oil and natural gas for a significant contribution to its GDP while Bahamas, Cayman Islands and Bermuda rely on tourism. However, oil and gas revenue and tourism aren't enough for national social security; employers are to make contributions on behalf of their employees.

NRI shall not be taxed in India. But for citizen of India, Taxable Income is taxed in three ways. Tax Deducted at Source (TDS), Advance tax and Self-Assessment Tax are Direct Tax.

A person who is liable to make payment of specified nature to any other person shall deduct tax at source and remit the same into the account of the Central Government. TDS is deducted at source from Salary/Pension which is reflected in Form 26AS. A deductor (employer) has to issue TDS certificate for each deductee (employee) at the end of FY.

Assesses end up paying huge sums as Interest/Penalties to the Dept of Income Tax. Everyone whose earnings are not subject to TDS is liable to pay Advance Tax. It’s mostly paid by Corporate and Professional, whose incomes are not under TDS but assesses including Salaried Employees and Pensioners have to be careful about interest earned from Savings Bank, RDs, FDs, SCSS, LIC’s PMVVY, Capital Gains, Rent or any other sources of income as per Income Tax Slabs, whose Tax Liability for the FY 2019-20 is more than Rs 10,000.

Bank must deduct TDS on interest as per individual income but software does with 10% only. However Senior Citizens get exempted up to Rs 50,000 under Section 80TTB. Assesses get messages for payment of Fourth and Final Instalment of Advance Tax by March 15. However the last day for paying Advance Tax for Employees is 31 March.

If any balance tax paid by assesses after taking TDS and Advance Tax is called Self Assessment Tax. Tin-nsdl.com is the site for pay Taxes online. Challan ITNS 280 is for payment of Income tax, Corporation tax and Wealth tax and ITNS 281 is for depositing TDS from corporate or non-corporate. Assesses see nightmares after not familiar with online payment but it can be submitted through bank.

Our FY starts from April to March, the inheritance from the British rule. Form 16 is issued after the end of FY for tax deduction in income from salary and Form 16A is issued on quarterly basis for tax deduction on incomes other than salary. A deductee must crosscheck TDS using Form 26AS that has been deposited by the deductor with the Government.

The TDS amounts reflected in Form 26AS and Form 16/16A should always be the same. Any short or non-payment or deferment of payment of Advance Tax will result in levy of interest. It could still be paid as Self Assessment Tax at filing Income Tax Return by 31 July but with an interest of 1% will be charged under Section 234C and 234B.

Taxpayers are obviously confusing a Financial Year (AY) with an Assessment Year (AY). FY is the year in which you earn an income. AY is the year following the FY in which you have to evaluate the previous year's income and pay taxes on it.

Tax department has started providing pre-filled ITRs on the online platform. A person can claim the refund of the excess tax paid/deducted during a FY by filing ITR for that year after declaring tax saving investments. Isn‘t a tricky task to minimise tax liability while maximising take home pay that‘s everybody’s concern?