Introduction

The Income Tax Department of India has classified the income of an Indian citizen into five broad categories based on the income sources. These five categories are mainly salary, house property, business, capital gains, and other sources. Every person with income is supposed to pay an income tax to the government. Every person is required to file their tax returns within a fixed deadline. The section is divided into several categories to deal with different types of returns, and every Indian citizen is advised to follow these guidelines.

Section 139 of the Income Tax Act of 1961 has several subsections defining norms and regulations as per different cases and circumstances. The following section will talk about them in length.


Mandatory Returns

Section 139(1) deals with the mandatory return policies while filing the Income Tax Return. The following entities are to file their tax return:

  • Every person with a total income that exceeds the exemption limit has to furnish the income tax return within the defined due date.
  • Any private, public, domestic or foreign entity located in India or doing business in India.
  • Firms, including LLP (Limited Liability Partnership) or ULP (Unlimited Liability Partnership).
  • Residents who have assets located outside of India or any entity which retains authority for an account based outside India.
  • Every HUF (Hindu Undivided Family), AOP (Association of Persons) and BOI (Body of Individuals) has to file an Income Tax Return if their income exceeds the prescribed exception limit.
  • Voluntary Tax Returns are specific cases when individuals or entities are necessarily required to file the return.
  • Under Section 139(1c), certain classes of people who fulfil a certain condition are exempt from filing the tax return. The issued notice should be placed before each House of Parliament for 30 days when sessions are held immediately following the notification. Only upon agreement by both the Houses, the notification shall be effective.

Filing for Income Tax in the case of a loss

Section 139(3) deals with filing income tax returns in the case of a loss. It is usually quite useful to file for the return in the case of losses, as the loss is allowed to be carried forward, reducing the tax liability in subsequent years. The following are specifically defined cases-

  • In the case of an Individual Taxpayer, the tax return is not mandatory of the loss was incurred in the previous financial year. However, in the cases for loss in companies and firms, the tax return for a loss is mandatory.
  • If the loss for a company arises under the head “Profits and Gains of Business and Profession” or “Capital Gains”, filing the tax return shall be mandatory in the case that company wants to carry ahead the loss and offset with the future income. The option is only available if the tax return is filed in due date.
  • In the case of loss occurring in “House or residential property”, the loss can be carried forward even if the tax return is filed beyond the due date.
  • Except "House and Property", other losses filed under Section 142(1) cannot be carried forward, leaving out the unabsorbed depreciation value.
  • In the alternative case of loss being offset against some income in another category for the same year, offset is permitted even if the return is filed beyond the due date.
  • Losses incurred in previous years can be carried forward if the return is filed by the due dates having assessed the losses.

Belated Income Tax Return

It is advisable for a taxpayer to be it an individual or any other entity, to furnish the tax return before the due date as per Section 139(1) of the act. However, if the return file is still delayed, there is still the possibility of filing the belated return for prior years until the expiry date of the current applicable year of assessment or before the financial year is concluded. Nonetheless, if the taxpayer fails yet again, a penalty of 5,000 rupees is charged under Section 271F of the IT Act, 1961. The penalty can be escaped if the income did not require the mandatory filing as defined under Section 139(1) and the return was filed after the due date.


Revised Income Tax Return

Sometimes it may happen that the Income Tax Return was filed in time, but some mistakes occurred. The taxpayer has the provision to correct any mistake done in the file for revising return of income tax under Section 139(5). It can be filed any time within the pertinent year of assessment or before the completion of the assessment, whichever comes first. There is no limit to the frequency of revising the tax return file as long as it is within the time frame. The revising can be done either in the same form or by issuing a different return form. The original return will be considered to be withdrawn once the new return is filed. It should be noted that Section 139(5) is valid only in the case of "Omissions and Wrong Statements and not "Concealment or false statements". Thereby, only unintentional mistakes can be revised and otherwise, the penalty shall be imposed.


Charitable Trusts

Some individuals receive their income by property held under such legal obligation that it might fully or partially fall under religious or charitable purposes. It can also be an income of voluntary contributions as referred to in subsection 2(24)(iia). In both the cases, the tax return has to be filed as per Section 139(4A) if the gross total income exceeds the maximum allowable amount which is not considered taxable under income tax.


Political Parties

Section 139(4B) requires political parties to file an Income Tax return in the case that their total income—which might be majorly made of voluntary contributions by the public—exceeds the maximum allowable tax-exempt limit. The Chief Executive Officer or the Secretary is the one with the responsibility to furnish the tax return for the same by the due date.


Section 10 with relation to ITR

As per Section 10 of the Income Tax Act of 1961, there are certain institutions which can claim certain benefits and for the tax return of these institutions- Section 139(4C) and Section 139(4D) are to be referred to.

Section 139(4C) includes those institutions for which it is necessary to file a tax return if the maximum allowable limit is beyond the maximum cap of tax exemption, which shall exclude other exemption benefits enjoyed by the institution.

These institutions are mainly the following groups and agencies-

  • Associations engaged in scientific research
  • Institutions or associations under Section 10(23A)
  • News agencies
  • Institutions under Section 10(23B)
  • Educational and Medical Institutions, Universities and Hospitals

Under the Section 139(4D), return file is not applicable for all colleges, universities and institutions and they do not need to file tax returns of income and loss under any specific provision in this section. The section applies for Section 31(1)(ii) and Section 35(1)(iii) of the IT Act.


Defective Returns

A tax return can be deemed to be defective under Section 139(9) if documents are missing. The taxpayer shall make the judgement of a defective return, and the taxpayer shall be duly notified via a simple letter. A time slot of fifteen days shall be given to rectify the problem and produce the missing documents. The period might also be extended upon the request of the taxpayer providing valid reasons. Thereby, one must note the following list of documents for your file to avoid being deemed as defective.

  • Statement displaying the computation of payable taxes.
  • Filed tax return in the required form.
  • Proofs of all claims of the taxes paid.
  • Before filing the return, a report is furnished. This report of the auditing done under Section 44AB is required.
  • Copies of the audit report, balance sheet, auditor's profit and loss accounts in case the tax payer's account is audited.
  • The relevant report in the case of Cost Audit.
  • If the taxpayer has no book maintained for accounts, then a statement is required indicating the gross receipts, turnover amount, bank balance, stocks, cash, debtors or creditors information, expenses and net profit, etc.
  • In the case that the taxpayer maintains a book of the accounts, then these mandatory copies are required:
    1. All accounts of Profit and Loss, Manufacturing accounts, Trading accounts, Balance sheet, and accounts of all income and expenses.
    2. Personal accounts of partners in the case of partnership firms
    3. For AOP/BOI, all members should produce their personal accounts.
    4. Proprietor’s personal account.

Due Dates

Different individuals attain their income through different methods, and therefore, Section 139 has prescribed due dates for the specific demand of filing the income tax returns. The dates are as follows-

  • July 31st- Several people and entities do not require the specific need for an audit report to validate the accounts. These individuals and entities are to file their income tax returns by July 31 of every assessment year. These entities mainly include – a paid employee, a self-employed or professional, a freelancer or a consultant.
  • September 30th- Various other entities are necessarily required to undergo the auditing of the account books, and they have time up September 30th to file their tax returns. The following entities can be included in this category- business entity and a working partner employed with a firm or consultant who has the audit performed on their accounting books.

Form ITR 7

The Income Tax Department has released the form ITR 7 for all the individuals and entities that are required to file their return under the first four parts of Section 139(4). It is suggested for the taxpayers to match their tax figures of paid and deducted amounts with Form 26AS or the Tax Credit Statement.

The following methods can be employed to file with the Form ITR-7 with the IT Department-

  • Paper form
  • E-Form using a digital signature
  • Electronic transmission of data followed by submission and verification of the return in Form ITR-V.
  • Barcoded return.

Section 4E of 139 is for furnishing return for the income of other business trusts which are not provided to submit their profit and loss accounts.


Conclusion

There are certain amendments which have been made in recent years in Section 139 of the Income Tax Act. These mainly include some changes in the clauses and statements for the easy communication of the information. There are plenty of provisions made for the convenience of various taxpaying entities and also scope revising defective forms. One should be conscious of the due date and extension provided, if any. One must also note the specific provisions as per their distinct category and make sure to produce all the documents for the form to be accepted. The latest online portals have made this essential task fairly easier and convenient such that a person can review all their accounts at one place and perform the duties of tax payment very easy.


Frequently Asked Questions

Q- How does the government collect Income Tax?

Ans.

The government collects taxes through three different means:

  • Through voluntary payment by taxpayers into various designated Banks. For example, Advanced Tax and Self Assessment Tax paid by taxpayers.
  • Taxes deducted at source [TDS] from the income of the receiver.
  • Taxes collected at source [TCS].

It is the constitutional obligation of every individual earning to compute his income and pay all the taxes correctly and on time to avoid any legal action.


Q- Where should the books of account of business be kept, and for how long?

Ans. All the books of account and related documents should be kept at the principal place of business, which means that generally where the business or profession is generally carried on. All the necessary documents shall be preserved for at least six years from the end of relevant Assessment year i.e for a total of seven financial years from the end of the relevant year. When the assessment has been reopened, all the books of account and other documents which were kept and maintained at the time of reopening of assessment should continue to be so kept and maintained till the assessment which has been reopened gets completed.


Q- Income-tax is levied on the income of every person. As per the Income-tax Law, what constitutes income?

Ans. Under the Income-tax Law, the word income has a very broad and inclusive meaning. In case of a salaried person, all that is received from an employer in cash, kind or as a facility is considered as an income. For a businessman, his net profit will constitute his income. Income may also flow from investments in the form of Interest, Dividend, Commission, etc. Further, income may be earned on account of sale of capital assets like building, gold, etc.
Income shall be computed as per relevant provision of Income-tax Act, 1961 which lays down detail condition for computation of income chargeable to tax under various heads of income.


Q- What is a tax on regular assessment and how is it paid?

Ans. Under the Income-tax Act, every person has the responsibility to correctly compute and pay his due taxes. Where the Department finds that there has been an understatement of income and resultant tax due, it takes measures to compute the actual tax amount that ought to have been paid. This demand raised on the person is called as Tax on regular assessment. The tax on regular assessment-400 has to be paid within 30 days of receipt of the notice of demand.


Q- What is the administrative framework of Income Tax?

Ans. The revenue functions of the Government of India are managed by the Ministry of Finance. The Finance Ministry has entrusted the task of administration of direct taxes like Income-tax, Wealth tax, etc to the Central Board of Direct Taxes (CBDT). The CBDT is a part of the Department of Revenue in the Ministry of Finance.
CBDT provides essential inputs for policy framing and planning of direct taxes and also administers the direct tax laws through the Income-tax Department. Thus, Income-tax Law is administered by the Income-tax Department under the control and supervision of the CBDT.


Q- What does completion of assessment mean?

Ans. Completion of assessment means assessment proceedings of the assessee is completed and closed,


Q- What are the various Forms through which income tax return can be filed?

Ans. There are various forms Like ITR 1/2/3/4/5.


Q- Where are these forms available?

Ans. Forms are easily available on Income Tax site.


Q- Can income tax return be filed, manually?

Ans. Yes, ITR1 and ITR 4 can be filed manually. It is specially done for senior citizens


Q- What are the advantages of filing income tax return?

Ans. There are various benefits of filing income tax return where one may be taxpayer get their refund.


Q- What are the consequences of not filing tax returns?

Ans. Taxpayer may get notice from Income Tax Department for not filing Income Tax Return.


CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.