Tax2clear Frequently Asked Questions
Best answers for your complex tax issues.
Q.
What incomes are charged to tax under the head ‘Capital Gains’?
Income that arises from selling a capital asset is known as capital gains. A capital asset includes any type of property that an assessee holds for any purpose. The capital assets are taxable in the hands of the receiver in the year of transfer of the capital asset. Such tax is known as capital gains tax. Capital gains tax is of two types – short-term capital gains and long-term capital gains. The sale value of the asset is reduced by the cost of acquisition, and the profit from the sale is charged to tax as capital gains.
- Land
- Building
- House property
- Patents
- Trademarks
- Vehicles
- Leasehold Property
- Machinery
- Jewellery
Q.
What is the meaning of capital asset?
Capital assets are significant pieces of property like investments, stocks, bonds, homes, cars, and art collectibles. Capital assets generally have a useful life of more than one year and are not intended for sale in the due course of a business. For example, a car purchased for the purpose of reselling and not for use will be considered an inventory. However, a car purchased by an individual or a business for the purpose of use in the business is considered a capital asset. Section 2(14) of the IT Act 1961 defines the capital asset as:
- Any kind of property held by the assessee, whether related to his/her business or not.
- Securities held by Foreign Institutional Investors (FIIs) who have invested in securities as specified by the SEBI Act, 1992.
- Any Unit Linked Insurance Policy (ULIP) that is not covered under the exemptions on clause 10D of section 10.
Q.
What is the meaning of the term ‘long-term capital asset’?
A long-term capital asset is an asset held for more than 36 months before the date it is transferred. However, an asset is known as a capital asset even when it is held for more than 12 months in the following cases:
- Equity shares or preference shares that are listed on a recognized Indian stock exchange
- Other securities listed on the Indian Stock Exchange
- Units of UTI
- Units of an equity-oriented fund
- Zero coupon bond
- Unlisted preference shares or equity shares held in a company (if these shares were transferred on or before 10th July 2014)
- Mutual fund units as specified under section 10(23D), except the equity-oriented fund.
Q.
What is long-term capital gain and short-term capital gain?
Any capital gain that arises from the sale of a long-term capital asset is known as a long-term capital gain. The classification of assets as short-term or long-term is done on the basis of the period of holding. The benefit of indexation is also available on a long-term capital gain. The indexation benefit increases the asset’s acquisition cost, thereby reducing the profit and tax.
Short-term capital gain is the gain that arises from the sale of short-term capital assets. Short-term capital gains are also classified on the basis Démarrer leur holding period and the type of the asset. If you have a short-term capital gain, you cannot avail yourself of the benefit of indexation. Also, the tax rates on short-term capital gains on equity mutual funds are higher than that on long-term capital gains. You can calculate the indexed cost of acquisition using an indexed cost calculator.
Q.
Why are capital gains classified as short-term and long-term?
The holding period of the asset defines its taxability. Whether you have to pay tax on a capital gain depends on how long you have held the asset. The tax rates on short-term and long-term capital gains also differ from each other. Therefore, capital assets are classified as short-term and long-term.
The sale of assets held for a period longer than 1 year and fixed assets held for a period longer than 3 years are chargeable to tax as long-term capital gains. The tax rates on long-term capital gains can be 0%, 15%, or 20% of the taxable income.
Q.
How to compute long-term capital gain?
Long-term capital gains arise when the owner of an asset sells it at a profit after holding it for 1 year (in the case of shares and securities) and before 3 years (in the case of assets like land, buildings, etc.).
The computation of long-term capital gains is performed as below:
Long-term capital gain = Sale Price – (indexed cost of acquisition + indexed cost of improvement + transfer cost)
- Indexed cost of acquisition = cost of acquisition x cost of inflation index of the year when the asset was transferred or acquired.
- Indexed cost of improvement = cost of improvement x the cost inflation index of the year in which the asset was transferred or the cost inflation index of the year of improvement.
Q.
How to compute short-term capital gain?
A short-term capital gain arises when a capital asset held for less than 1 year and 3 years is sold at a profit thereafter.
Short-term capital gains on shares are computed as follows:
Suppose you bought 100 shares of X Ltd. at Rs.100 each and sold at Rs.120 after holding for 6 months. Then,
STCG = Sale Price – Purchase price = Rs.120×100 – Rs.100×100 = Rs.2000
The sale price is computed as:
Sale value of an asset – (brokerage charges + securities transaction tax)
Short-term capital gains on assets are computed as follows:
STCG = sale value of the asset – (cost of acquisition + expenses incurred while transfer + cost of asset improvement)
Cost of acquisition – For a short-term asset purchased before 1st Feb 2018, it is calculated as follows:
- The fair market value of assets is calculated by multiplying the number of shares with the highest share price on 31st Jan 2018.
- The fair market value is then compared with the actual sale value of the shares, and the lower between the two is selected.
- The resultant figure is compared with the actual purchase value, and the higher between the two is chosen.
Cost of improvement refers to the expenses incurred on improving the asset. It includes construction, expansion, or repair of an asset. However, this does not apply in the case of equity shares.
Q.
Is the benefit of indexation available while computing capital gain arising on the transfer of short-term capital assets?
If the property is acquired before 1st April 2001 by the assessee, the cost of acquisition of the asset is calculated as follows:
The assessee can consider any of the below options as the cost of acquisition:
- The asset’s fair market value as of April 1st, 2001
- The asset’s actual cost of acquisition.
- The assessee can choose any of the above options as the cost of acquisition. If the option is available, the higher of the two is considered the cost of acquisition.
- If the asset is of depreciable nature, this option is not available.
- This option is also not available if the capital asset is a goodwill or trademark.
* Fair market value or FMV is the price at which an asset would ordinarily sell at a given date in the open market.
Q.
If any undisclosed income [in the form of investment in capital asset] is declared under Income Declaration Scheme, 2016, then what should be the cost of acquisition of such capital asset?
Income Declaration Scheme 2016 does not provide specific provisions for the cost of acquisition. However, the basic objective of the Income Declaration Scheme is to allow individuals to disclose their undisclosed income and pay tax on it to avoid any kind of penalty in the future.
The cost of acquisition or any other consideration paid for acquiring the asset is irrelevant to IDS. Therefore, the fair market value of the asset is considered to be its cost of acquisition. The cost of acquisition represents the price that the asset would sell at in an open market.
Therefore, the cost of acquisition while declaring an undisclosed asset under the Income Declaration Scheme of 2016 is the fair market value of the asset.
Q.
As per the Income-tax Law, the gain arising on the transfer of the capital asset is charged to tax under the head “Capital gains.” What constitutes ‘transfer’ as per Income-tax Law?
As per the Income Tax Act of 1961, the transfer of assets can be understood as the transfer of the rights or the ownership of any asset to another individual or company. It includes the following:
- The sale or exchange of the asset
- Extinguishment of rights
- A compulsory acquisition under any law
- When an asset is converted into stock-in-trade by the owner
- The redemption of Zero coupon bonds
- Any transaction that involves allowing the possession of an immovable property that is to be retained as a part of the performance of a contract.
- Any transaction involving the transferring of an immovable property
Q.
Are any capital gains exempt under section 10?
Exempted capital gains US 10:
- Capital Gain on Transfer of US64 [Section 10(33)] Any income from a capital asset being a unit of US 64 is not chargeable to tax where such assets transfer occurs on or after April 1, 2002.
- Long-Term Capital Gain on Transfer of BSE-500 Equity Shares [Section 10(36)]
- Capital Gain on Statutory Acquisition of Urban Agricultural Land [Section 10(37)]
- In the Land pooling scheme (of the Andhra Pradesh Government), compensation in the form of reconstituted plots or land is provided to landowners.
- For this scheme, the capital gain exemption is available (from the assessment year 2015-16) under section 10(37A)
- Under section 115JG(1), capital gains that arise on the conversion of an Indian branch of a foreign bank into an Indian subsidiary are not chargeable to tax.
- Capital gain arising from any award/agreement under the Right to Transparency and Fair Compensation in Land Acquisition, Resettlement (RFCTLARR) Act, 2013, and Rehabilitation is tax exempted.
Q.
At what rates capital gains are charged to tax?
On selling equity shares or equity-oriented mutual funds after holding them for more than a year, taxpayers have to pay long-term capital gains tax (LTCG) on the profit. The LTCG tax rate is 10% for gains exceeding ₹ 1 lakh in a financial year. However, for other types of investments, such as unlisted securities or zero-coupon bonds, the LTCG tax rate is 20%. If equity shares or equity-oriented mutual funds are sold within one year, taxpayers have to pay short-term capital (STCG) on the profits. The STCG tax rate depends on whether the securities transaction tax (STT) is applicable or not. If STT is applicable, the STCG tax rate is 15%. If STT is not applicable, the STCG tax rate will be applied as per the income tax slab the assessee falls under.
Q.
Is there any benefit available in respect of re-investment of capital gain in any other capital asset?
There are tax benefits on capital gains by reinvesting them in other assets as per the Income Tax Act 1961.
Section 54EC: You can reinvest long-term capital gains from any asset except a house in bonds of the National Highways Authority of India (NHAI) or the Rural Electrification Corporation (REC). The amount of capital gains that can be reinvested under this section is limited to the capital gains arising from the asset’s sale or ₹50 lakhs, whichever is lower.
Section 54F: Any individual or HUF can reinvest LTCG from any asset other than a residential house property to a new residential house (Limited to One) in India. The amount of capital gains that can be reinvested under this section is limited to the capital gains arising from the asset’s sale, but it is capped at ₹10 crores.
Reinvestment should happen within six months U/S 54EC and within one year U/S 54F. Investing in certain assets like infrastructure or renewable energy may have other tax benefits.
Q.
Are there any bonds in which I can invest my capital gains to claim tax relief?
There are some bonds in which an individual can invest capital gains to claim tax relief. These bonds are known as capital gains bonds or Section 54EC bonds.
Capital gains bonds are issued by government-owned companies such as the National Highways Authority of India (NHAI), the Rural Electrification Corporation (REC), and the Power Finance Corporation (PFC). These bonds offer a fixed interest rate and a maturity period of 5 years.
To claim tax benefits on capital gains bonds, you must reinvest the capital gains from selling a capital asset, such as a house or land, in these bonds within 6 months of the sale. The maximum amount of capital gains an individual can reinvest in capital gains bonds is ₹50 Lakh.
Q.
What is the meaning of stamp duty value and what is its relevance while computing capital gain in case of transfer of capital asset, being land or building or both?
The stamp duty value is the price used to calculate stamp duty; it’s a tax levied on the sale of property. U/S 50c of the Income Tax Act, if the actual sale consideration for a property is less than the stamp duty value, then the stamp duty value will be used to calculate capital gains. I.e., The seller will be liable to pay tax on the entire stamp duty value, even if they received a lower consideration. This might happen when the seller sells the property to the related party at a discounted price or at a loss.
Q.
Whether interest received on amount deposited in capital gain account under capital gain account scheme is taxable?
Interest received on the amount deposited in a capital gain account under the Capital Gains Account Scheme (CGAS) is taxable under the Income Tax Act, and is taxed at the applicable rate. The tax is deducted at source by the bank or the financial institution where the account is held. The depositor will receive a TDS certificate from the bank or financial institution, which can be used to claim a deduction for the tax paid while filing the Income Tax Return (ITR). Moreover, The interest is taxable in the year in which it is credited to the account.
Q.
Which Form is to be filed for withdrawal from Capital Gain Account?
To withdraw from a capital gains account, you are required to fill out Form C. The withdrawn amount must be used within 60 days and cannot be deposited immediately into the account. You must fill out Form D if the second withdrawal is still needed.
Capital gains accounts can be transferred from one branch to another within the same Bank, but not from one Bank to another. Account type can also be changed from a term deposit to a saving account; however, if you transfer a term deposit to a saving account before the term deposit matures, you will be charged a penalty.
Q.
Whether profit earned from sale of land or building or both chargeable to capital gain tax?
Profit earned from the sale of land and building or both is chargeable to capital gains tax. The tax liability depends on the holding period of the asset. If the land or building is held for less than two years, the capital gains will be considered short-term capital gains, and the tax rate will be the same as the individual’s income tax slab. On the other hand, if the land or building is held for more than two years, the capital gains will be considered long-term capital gains, and the applicable tax rate will be 20%.
Q.
I want to close my capital gain account. The capital gain amount is already disbursed and only interest is lying in account. The branch manager asked for Form G with AO’s endorsement on it. How to get it? Please advise procedure?
Steps to close your capital gain account with AO’s endorsement:
- Download Form G from the Income Tax Department website.
- Fill out the form and attach the following documents:
- Passbook of account A or deposit receipt of account B, as the case may be.
- A letter from your bank stating that the capital gain amount has already been disbursed and only interest remains in the account.
- Copy of your ID proof.
- Copy of your PAN card.
- Take the form and documents to the Assessing Officer (AO) with jurisdiction over you.
- The AO will review the documents and endorse the form.
- Take the endorsed form back to your bank.
- The bank will close your account and pay you the interest amount.
- The AO might ask you for additional information or documents.
- The process of closing your account may take a few weeks.
- You cannot claim any tax benefits on the interest earned in the account after it is closed.
Q.
What are the provisions relating to the computation of capital gain in case of asset transfer by way of gift, will, etc.?
- Cost of acquisition: The cost of acquisition of the asset for the gift recipient will be the cost of acquisition to the previous owner plus any costs incurred by the gift recipient in improving the asset.
- Holding period: The asset’s holding period for the gift recipient will be the asset’s holding period to the previous owner.
- Capital gains computation: The capital gains will be computed as the difference between the asset’s sale price and the acquisition cost. The capital gains will be taxed as short-term capital gains if the asset is held for less than 24 months and as long-term capital gains if the asset is held for more than 24 months.
Q.
I have sold a house which had been purchased by me 5 years ago. Am I required to pay any tax on the profit earned by me on account of such sale?
Profit earned from the sale of a house purchased 5 years ago is subject to long-term capital gains tax, as the holding period exceeds 2 years. The tax rate for long-term capital gains on a house is 20% with the benefit of indexation, which adjusts the cost of acquisition for inflation, thereby reducing the taxable profit.
To compute the long-term capital gain: Long-term capital gain = Sale Price – (Indexed cost of acquisition + Indexed cost of improvement + Transfer cost). The indexed cost of acquisition is calculated as: Cost of acquisition × (Cost Inflation Index of the year of sale / Cost Inflation Index of the year of purchase).
Exemptions may be available under Section 54 if you reinvest the capital gains in another residential property within the specified time (2 years for purchase or 3 years for construction). The reinvested amount is limited to the capital gains. Alternatively, under Section 54EC, you can invest up to ₹50 lakh of the capital gains in specified bonds (e.g., NHAI or REC) within 6 months to claim tax relief.
It is advisable to consult a tax professional to calculate the exact tax liability and explore available exemptions based on your specific circumstances.
What is an Income Tax Return (ITR)?
- ITR 1: For individuals with a total income of up to ₹5 lakhs
- ITR 2: For individuals with a total income of more than ₹5 lakhs
- ITR 3: For individuals engaged in business or profession
- ITR 4: For salaried employees
- ITR 5: For Hindu Undivided Families (HUFs)
- ITR 6: For trusts and charitable organizations
- ITR 7: For individuals with income from overseas sources
Who needs to file an Income Tax Return in India?
- If an individual is less than 60 years of age and their total annual gross income exceeds ₹2.5 lakh.
- If a person is a senior citizen (aged 60-79) and their annual gross income surpasses ₹3 lakh.
- If a person is a super senior citizen (aged 80 and above) and their annual gross income exceeds ₹5 lakh.
What are the benefits of e-filing the return of income?
- No More Standing in a Queue: E-file your income tax return from the comfort of your home.
- Online Status Check: Track the status of your return online with ease.
- No More Errors: E-filing software helps avoid errors by adhering to the latest tax laws and regulations.
- Faster Refund: E-filed returns are processed faster, leading to quicker refunds.
- Auto Saving of Records: Many e-filing programs automatically save tax forms with information from previous returns, saving time.
- Easy Access to Documents: Store your tax documents online for easy access.
- E-Verification: Verify your identity and sign tax returns electronically.
Can I revise my ITR after filing?
How many times can I revise the return?
If I have paid excess tax, how will it be refunded to me?
Can I file my ITR without a Permanent Account Number (PAN)?
- Visit the Income Tax e-Filing portal and click “Instant e-PAN.”
- Click “Get a New e-PAN” on the next page.
- Enter your 12-digit Aadhaar number.
- Select the “I confirm that” checkbox and click “Continue.”
- Receive and validate an OTP sent to your registered mobile number.
- Select the “I accept that” checkbox and click “Continue.”
- An acknowledgment number will be provided, and the e-PAN will be issued shortly after.
Is it mandatory to link Aadhaar with PAN for filing ITR?
- Residents of Assam, Jammu and Kashmir, and Meghalaya
- Non-residents as per the Income-tax Act, 1961
- Individuals aged 80 years or older
- Non-citizens of India
What are the changes incorporated in new ITR forms after introduction of section 89A?
Do I need to file an ITR if my income is below the taxable limit?
- Deposited over ₹1 crore in one or more current bank accounts.
- Incurred expenditure exceeding ₹2 lakh for foreign travel for yourself or others.
- Incurred electricity consumption expenditure exceeding ₹1 lakh.
What to do if discrepancies appear in actual TDS and TDS credit as per Form 26AS?
- Pay Tax Again: Claim TDS credit in the ITR to avoid double taxation on the same income.
- Claim TDS Credit Manually: Provide evidence like salary slips or bank statements to support your claim.
What happens if there are errors in my filed ITR?
Can I file my ITR if I have investments in foreign assets?
- Foreign depository accounts
- Foreign equity and debt interest
- Foreign cash value insurance contracts
- Financial interest in any entity outside India
- Name, country, value, acquisition date, and source of funds for the asset
What are the consequences of not filing an ITR?
- Penalties: Up to ₹5,000 for late filing, or ₹10,000 if filed within a year after the due date.
- Interest: 1% monthly interest on unpaid tax.
- Non-Carry Forward of Losses: Inability to carry forward losses from previous years.
- Best Judgment Assessment: The assessing officer may assess tax under section 144.
- Refund Issues: Refunds can only be claimed by filing an ITR.
Please clarify whether holding of equity shares of a Co-operative Bank or Credit Societies, which are unlisted, are required to be reported?
I am resident and have sold land and building situated outside India. Whether I need to report the details of property and identity of buyer in Schedule CG?
- Property details: Location, type, purchase date, purchase price, and current market value.
- Buyer details: Name, address, and PAN.
- Capital gains: Amount, short-term or long-term nature, and tax paid.
An unlisted company is required to furnish details of assets and liabilities in the Schedule AL-1 of ITR-6? Please clarify whether details of assets held as stock-in-trade of business are also required to be reported therein.
- Cost of the stock-in-trade
- Fair market value of the stock-in-trade
- Quantity of stock-in-trade
- Type of stock-in-trade
Please clarify whether a farmer producer company as defined in section 581A of Companies Act, 1956 is required to furnish details of shareholding in the Schedule SH-1 of ITR-6?
How do I track the status of my ITR?
- Visit the e-filing portal homepage and click ‘Income Tax Return Status.’
- Enter your valid mobile number and acknowledgment number, then click ‘Continue.’
- Enter the 6-digit OTP received on your registered mobile number and click ‘Submit.’
- View the ITR status after validation.
- Log in to the e-filing portal with your user ID and password.
- Go to e-file > Income Tax Returns > View Filed Returns.
- View all filed returns and download ITR-V acknowledgment, intimation order, or complete ITR form in PDF.
- Click ‘View Details’ for specific return status.
Is there any special benefit available under the income tax law to senior citizens?
- Basic exemption limit of ₹3 lakh under both tax regimes.
- Deduction of up to ₹50,000 for health insurance premiums under section 80D.
- No tax on annual interest up to ₹50,000 under section 80TTB.
- Exemption from filing ITR for those above 75 years with only pension and interest income, upon submitting Form 12 BBA to a specified bank.
- No advance tax requirement unless income is from business or profession.
- Deduction of up to ₹1 lakh for treatment of specified diseases under section 80DDB.
- Tax-exempt rent from reverse mortgaging property.
- Standard deduction of ₹50,000 on pension income and ₹15,000 for family pensioners.
Can an Authorized Signatory / Representative Assessee e-Verify the return on my behalf?
- Aadhaar OTP: OTP sent to the representative’s Aadhaar-linked mobile number.
- Net Banking: EVC sent to the representative’s mobile number and email ID.
- Bank/Demat Account: EVC generated through a pre-validated, EVC-enabled account sent to the representative’s email or mobile.
How will I know that my e-Verification is complete?
- A success message with a Transaction ID is displayed upon e-verification.
- An email is sent to the registered email ID for self-verification, or to both the assessee and authorized signatory’s email and mobile for representative verification.
Is a senior citizen exempt from filing ITR?
- They are residents in the previous year.
- They have income only from pension and interest from the same specified bank.
- They submit a declaration to the specified bank, which must be notified by the Central Government.
My Self-Assessment / Advance Tax in my Annual Tax Credit Statement (26AS) do not reflect the amounts deposited by me. What do I need to do now?
- Ask the deductor to file a revised TDS return.
- File a revised return if no intimation is received.
- Ensure correct challan details are included in the ITR.
- File a rectification request.
What can I do if there is a tax-credit mismatch in one of my filed Income Tax Return?
- Contact the deductor to file a revised TDS return with corrections.
- File a revised return if no intimation is received.
- File a rectification request.
- Ensure correct challan details in the ITR.
- Claim tax credit only for the amount reflected in Form 26AS.
Is the residential status of a person relevant for determining the taxability on the income in his hands?
- An HUF is resident in India if its management or control is fully or partially in India.
- An HUF is resident and ordinarily resident if the Karta is resident in India for 2 out of 10 previous years and stays in India for 730 days or more in the 7 years preceding the current year.
- If the Karta does not meet these conditions, the HUF is resident but not ordinarily resident.
- An HUF with control and management wholly outside India is non-resident.
Which incomes are taxable in India?
- Income from Salary: Income received from an employer.
- Income from House Property: Rental income from letting out property.
- Income from Capital Gains: Revenue from the sale of assets like stocks, bonds, or property.
- Income from Business/Profession: Earnings from business, profession, or freelancing.
- Income from Other Sources: Income not covered above, such as lottery winnings or dividends.
I am a non-resident. The Taxpayer Identification Number (TIN) is not allotted in my jurisdiction of residence. How do I report the same in the column on ‘residential status’?
- Spent 182 days or more in India in a financial year.
- Stayed in India for 60 days or more in a financial year and 365 days or more in the previous 4 years.
I am a director in a foreign company which does not have PAN. How do I report the same against the column ‘Whether you were Director in a company at any time during the previous year?’
I have sold land and earned capital gains. Whether I have to mention the date and sale of such land sold in the ITR forms?
In case unlisted equity shares are acquired or transferred by way of gift, will, amalgamation, merger, demerger, or bonus issue, etc. how to report the ‘cost of acquisition’ and ‘sale consideration’ in the relevant column?
I hold shares in an unlisted foreign company which have been duly reported in the Schedule FA. Whether I am required to report the same again in the column ‘Whether you have held unlisted equity shares at any time during the previous year?’
I have sold land and building to a non-resident. Whether I need to report the PAN of buyer in the table A1/B1 in Schedule CG?
Whether it is mandatory to provide ISIN details and scrip-wise computation of Long Term Capital Gains (LTCG) arising on sale of Shares/Mutual Funds units on which STT has been paid?
I hold foreign assets during the previous year which have been duly reported in the Schedule FA. Whether I am required to report such foreign asset again in the Schedule AL (if applicable)?
Q.
What is Form 16?
Q.
What is Form 16A, and how is it different from Form 16?
- PAN/TAN and employer’s name
- Employee’s name and PAN/TAN
- TDS payment number
- Payment details
- Date and amount of deposit
Q.
What should I do if I am not getting Form 16 from TRACES?
Q.
What are the rules for issuing Form 16?
- Employers must issue Form 16 to salaried employees liable to pay income tax.
- It is issued annually by June 15 of the next financial year.
- It must include details of TDS, employee’s name, address, PAN/TAN, salary breakdown (basic salary, allowances, perquisites), and deductions under section 80C.
- It should show the total tax deducted and deposited by the employer.
- It can be issued physically or electronically, with a digital signature for electronic issuance.
Q.
What is the income limit for Form 16?
Q.
Is Form 16 only for salaried employees?
Q.
Is Form 16 mandatory for ITR?
- Computing annual income from salary slips, adjusting for allowances.
- Verifying TDS details from Form 26AS.
- Computing income from house property.
- Calculating capital gains (exempt up to ₹1,00,000).
- Determining income from bank interest, etc.
- Adjusting for deductions and computing total taxable income.
- Paying any remaining tax after deducting tax paid as per Form 26AS.
- Filing the ITR after completing these steps.
Q.
Is Form 16 proof of employment?
Q.
Is Form 16 valid without signature?
Q.
Can Form 16 be issued without TDS?
- Acts as proof of income
- Helps in filing ITR
- Provides details of salary and deductions
- Crucial for loan and credit card applications
- Consolidates tax-saving investments
- Assists in visa processing
- Helps claim refunds for overpaid taxes
Q.
Can I fill Form 16 myself?
Q.
What if the figures in the Form 16 are wrongly mentioned?
- Inform your employer about discrepancies, providing evidence like salary slips or proof of deductions.
- Request the employer to correct the errors.
- Obtain the revised Form 16 with accurate details.
- Keep copies of both old and revised Form 16 for ITR filing.
Q.
While submitting request to download Form 16 / 16A, deductor has entered details correctly in Part 1 and Part 2 in validation details screen, yet it shows error as ‘Invalid Details’ in Part 1 and Part 2. What should deductor do?
- Verify that details in the TDS statement match those on the validation screen, including token number and TDS amount.
- Ensure any correction statements align with the provided details.
Q.
Is Form 16 to be issued to all employees?
Q.
What is the due date to issue Form 16?
Q.
Can deductor download Form 16 without being registered on TRACES?
Q.
What should I do in case company name is updated incorrectly in Form 16 (Part A) / Form 16A?
Q.
How can I edit or add detail of authorized person in Form 16 / Form 16A?
- Log in to the TRACES portal.
- Go to the Profile Tab.
- Enter details like last return filed, acknowledgment/token of the last original return, challan details, and three unique PAN and amount combinations for the challan.
- Edit the representative’s PAN in the Profile Tab.
- Provide PAN and date of birth; name and father’s name auto-populate.
- Edits are allowed only for the current financial year.
Q.
How are the particulars of those employees who are employed with more than one employer in a financial year to be shown in Form 16?
- Select the appropriate ITR form.
- Provide personal details like name and address.
- Add income earned during the financial year.
- Include TDS details and deductions like HRA or travel allowance.
- Calculate any tax payable.
- Use Form 12B to inform new employers about previous earnings and investments.
Q.
Even if no taxes have been deducted from salary, is there any need for my employer to issue Form 16 to me?
Q.
There are various deductions that are not reflected in the Form 16 issued by my employer. Can I claim them in my return?
- House Rent Allowance Exemption under section 10
- Deductions under section 80C
- Medical expenses
- Interest on home loans
- Life insurance premiums
Q.
If I receive my pension through a bank, who will issue Form 16 or pension statement to me – the bank or my former employer?
Q.
Do I have to attach Form 16 while filing income tax return?
Q.
What if I cannot get Form 16 from my previous employer at the time of joining?
- Salary slips for the period worked, detailing income and deductions.
- Form 12B, declaring previous earnings, investments, and other income sources to the new employer.
Q.
Registered user on TRACES has updated the communication and address details on TRACES. However, while downloading Form 16A, it shows a different address. How can deductor edit address details in Form 16A?
Q.
What is the amount of TDS if property belongs to NRI?
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What are the payments covered under the TDS mechanism and the rates for deduction of tax at source?
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Is there any minimum amount up to which tax is not deducted?
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Can the payee request the payer not to deduct tax at source and to pay the amount without deduction of tax at source?
- Form 15G: For individuals or entities (except firms and companies).
- Form 15H: For senior citizens.
Q.
How can I know the quantum of tax deducted from my income by the payer?
- Request a TDS certificate from the employer or deductor, detailing the amount deducted during the year.
- Log in to the Income Tax Department’s portal to view or download Form 26AS, which lists all TDS transactions for the year.
- Use the ‘View your tax credit’ facility on the Income Tax Department’s website.
Q.
At what rate the payer will deduct tax if a taxpayer doesn’t furnish return of income?
- The deductee has not filed an ITR for the assessment years or the year immediately preceding the year of tax deduction.
- The due date for filing ITR under section 139(1) has expired.
- The aggregate tax collected or deducted is ₹50,000 or more in the previous years.
Q.
What to do if the TDS credit is not reflected in Form 26AS?
- Contact the payer to identify the error and request a revised TDS return.
- Claim TDS credit manually during ITR filing with proof of deduction (e.g., salary slips).
- File a grievance with the concerned authority if the issue persists.
Q.
I do not have PAN. Can I furnish Form 15G/15H for non-deduction of TDS from interest?
- The rate specified in the Income Tax Act.
- The rate in force per the Finance Act.
- 20%.
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Would I face any adverse consequences if instead of depositing TDS in the government’s account I use it for my personal needs?
- Interest on delayed deposits.
- Penalties for non-compliance.
- Rigorous imprisonment for up to seven years.
Q.
I have not received TDS certificate from the deductor. Can I claim TDS in my return of income?
Q.
If I buy any land/building then is there any requirement to deduct tax from the sale proceeds to be paid by me to the seller?
Q.
How much TDS will be deducted in case of payment of Remuneration to company’s director?
- Salary: TDS under section 192 as per income tax slab rates.
- Fees or professional services (e.g., for non-executive or independent directors): TDS under section 194J at 10%, treated as income from business or profession.
Q.
Whether TDS required to be deducted on payment made to Government?
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Whether TCS can be collected on amount inclusive of GST?
Q.
What is considered as salary income?
- Wages
- Annuity/pension
- Gratuity
- Fees/Commission
- Salary in Advance
- Leave encashment
- Transferred balance in a provident fund to the extent it is taxable
- Central government’s contribution to an employee’s pension scheme account
Q.
What are allowances?
- House rent allowance
- Leave travel allowance
- City compensatory allowance
- Children education allowance
- Tribal area allowance
- Border area allowance
Q.
My employer reimburses to me all my expenses on grocery and children’s education. Would these be considered as my income?
Q.
During the year I had worked with three different employers and none of them deducted any tax from salary paid to me. If all these amounts are clubbed together, my income will exceed the basic exemption limit. Do I have to pay taxes on my own?
Q.
Even if no taxes have been deducted from salary, is there any need for my employer to issue Form-16 to me?
- Applying for loans
- Applying for credit cards
- Filing ITR
- Acting as proof of income
- Providing details on salary, exemptions, and deductions
- Checking for errors and making corrections
- Helping claim refunds
- Detailing tax-saving investments
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What is the taxability of ex-gratia received from employer?
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Is transport allowance can be claimed as exemption by an employee?
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Is pension income taxed as salary income?
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Is Family pension taxed as salary income?
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Are retirement benefits like PF and Gratuity taxable?
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Are arrears of salary taxable?
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My income from let out house property is negative. Can I ask my employer to consider this loss against my salary income while computing the TDS on my salary?
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Is leave encashment taxable as salary?
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Is standard deduction applicable to all the salaried person whether he is an employee of Central or State Government?
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Is standard deduction applicable to family pensioners?
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What is pre-construction period?
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My spouse and I jointly own a house in which both of us have invested equally out of independent sources. Can the rental income received be split up between us and taxed in the individual hands?
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What is self-occupied property?
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How to compute income from self occupied property?
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Can a property not used for residence by the taxpayer be treated as self occupied property?
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What income is charged to tax under the head ‘Income from house property’?
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What will be the tax implications if a person occupies more than one property for his residence? Can he treat all the properties as self occupied (SOP) and claim gross annual value (GAV) as Nil?
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I own two houses. One is a farmhouse that I visit on weekends and the other is in the city that I use on weekdays. Is it correct to treat both these residences as self occupied?
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In case of a self-occupied property, how much of interest on housing loan can be claimed as deduction?
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How to compute income from a property which is self-occupied for part of the year and let out for part of the year?
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What is the tax treatment of unrealised rent which is subsequently realised?
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Whether rental income could be charged to tax in the hands of a person who is not a registered owner of the property?
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I have 5 separate let out properties. Should I calculate the house property income separately for each individual property or by clubbing all the rental receipts in one calculation?
Q.
How to compute gross annual value of a property which is let-out throughout the year?
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Under which head is the rental income from a shop charged to tax?
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What is the tax treatment of composite rent when the composite rent pertains to letting of building along with other assets?
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How to compute reasonable expected rent while computing gross annual value of a property which is let-out throughout the year?
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How to compute actual rent while computing gross annual value of a property which is let-out throughout the year?
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Can interest paid on loans taken from friends and relatives be claimed as deduction while calculating house property income?
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What are the benefits available to a senior citizen and a very senior citizen in respect of tax rates?
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At what age a person will qualify as a senior citizen and very senior citizen under the Income-tax Law?
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Is there any special benefit available under the Income-tax law to very high aged person, i.e., very senior citizens?
Q.
Is a very senior citizen granted exemption from e-filing of income tax returns?
Budget 2021 introduced an exemption for seniors aged 75 years and older if they meet certain eligibility criteria. Section 194P was introduced in the Income Tax Act, as per which very senior citizens are exempt from tax if:
• The senior citizen must be a resident in India.
• The senior citizen should be 75 years old or older during the previous year, which would be applicable for the financial year 2022-23 (ended on March 31, 2023).
• The senior citizen should have pension income as their only source of income. However, they may also have interest income from the same bank where they receive their pension.
• If the very senior citizen fulfills these criteria, then he/she has to submit a declaration to the bank to deduct TDS from their income in the previous financial year, i.e., during FY 2022-23. If the senior citizen has not submitted the declaration during the last financial year, then the senior citizen will be required to file his/her ITR.
Q.
Is a Resident senior citizen granted exemption from payment of advance tax?
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What are the benefits available in respect of interest on deposits in case of senior citizens?
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What are the benefits available in respect of expenditure incurred on account of medical treatment of specified diseases on treatment of a senior citizen?
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Is a retired senior citizen granted exemption from payment of advance tax?
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How much is the income tax limit for senior citizens?
Q.
What is tax audit?
Literally, the word Audit means to check, review, and inspect. An audit is often associated with the inspection of a company’s books of accounts. Different laws require different types of audits; for example, company law requires you to conduct a company audit, Income tax law prescribes a tax audit, and cost accounting prescribes a cost audit.
Section 44AB of the Income Tax Act provides for the classes of taxpayers who are required to get their books audited by a Chartered Accountant.
The audit of the accounts of taxpayers conducted by a CA, as per the requirement of section 44AB, is known as a tax audit.
Q.
What is the objective of tax audit?
Below are the objectives of the tax audit –
• Ascertain/report/derive the requirements of Forms 3CA, 3CB, and 3CD.
• Ensures that the books of accounts and other account records are maintained properly and reflect the actual income of the taxpayer.
• It ensures that the claims for deduction are made correctly.
• Helps keep check of fraudulent activities
• Analyzes the accuracy of ITR filed in the A.Y. by companies and individuals.
• Reporting the findings of the tax auditor after analyzing the inaccuracies in ITR.
• Reporting details like tax depreciation and other compliances.
Q.
What is the due date by which a taxpayer should get his accounts audited?
Any person who is covered under section 44AB and gets his/her books audited is required to obtain the audit report from the auditor before 30th September of the assessment year. If you are filing the ITR for the previous year, 2022-2023, then you need to obtain the audit report before 30th September 2023 for the A.Y. 2023-2024.
A chartered accountant is required to electronically file the tax audit report to the Income Tax Department. Once a CA files the report, it has to be approved by the taxpayer using his/her e-filing account with the Income Tax Department.
Q.
What are Form Nos. 3CA/3CB and 3CD?
Any person mandated to conduct a tax audit of his/her books of accounts under section 44AB has to furnish either of the following –
Form 3CA: Any taxpayer having a business or profession and already mandated to get their accounts audited under any other law. For example, if a company needs to conduct an audit under the companies act, then it has to furnish Form 3CA.
Form 3CB: Any taxpayer having a business/profession but doesn’t have to get their accounts audited under any other law has to furnish Form 3CB. Proprietorship or partnership firms having opted for presumptive tax schemes and having a turnover exceeding Rs. 1 crore. Such companies are required to furnish Form 3CB.
Form 3CD: Form 3CD is a detailed statement of particulars that contains 41 different points. The details of various business and professional aspects must be furnished in this form.
Q.
If a person is required by or under any other law to get his accounts audited, then is it compulsory for him to once again get his accounts audited to comply with the requirement of section 44AB?
Q.
What is the penalty for not getting the accounts audited as required by section 44AB?
A person who has to follow section 44AB and does not get his accounts audited or submit the report as per section 44AB for any year or years may face a penalty from the Assessing Officer. The penalty amount will be the lower of the following:
• 0.5% of the total turnover, sales, or gross receipts in business or profession for that year or years.
• ₹ 1,50,000.
However, section 271B states that no penalty will apply if the person can prove a reasonable cause for such failure.
Q.
As per section 44AB, who is compulsorily required to get his accounts audited, i.e., who is covered by tax audit?
The taxpayers who need to get a tax audit done:
• An aggregate amount received, including the amount received for sales, turnover, or gross receipts during the previous year in cash, does not exceed 5% of the said amount.
• An aggregate of all payments made, including the amount incurred for expenditure, in cash, during the previous year does not exceed 5% of the said payment: Threshold limit would be ₹10 crores instead of ₹1 crore (from 1/4/21 for FY 2021-22 – 5 crores)
• An individual (In profession) with a gross receipt that exceeds ₹ 50 lakh during the previous year.
• An assessee opted for sections 44ADA and 44AD but claimed his income was lower than the profits computed under presumptive and income exceeds the taxable amount according to the Income Tax Act.
• An assessee opted for sections 44AE, 44BB, 44BBB but claimed his income was lower than the profits computed under the mentioned sections in any previous year.
Q.
Who is in charge of conducting a tax audit?
Q.
Who is exempt from undergoing a tax audit?
A tax audit verifies the accuracy and compliance of an assessee’s income tax return and financial statements as per the Income Tax Act 1961. However, not all taxpayers are required to undergo a tax audit. There are some exceptions available for certain categories of taxpayers, as follows:
• Any taxpayer earning income from the shipping business under section 44B of the Income Tax Act, 1961.
• Any taxpayer earning income from aircraft operation under section 44BBA of the Income Tax Act, 1961. This section provides a presumptive taxation scheme for computing the income from aircraft operations at 5% of the gross receipts.
• Any taxpayer whose books of account have been audited under any other law applicable to him. However, such a taxpayer has to furnish a tax audit report in Form 3CB, 3CA, or Form 3CD along with his return of income.
Q.
How many tax audit reports can a Chartered Accountant sign?
Q.
What is TAN?
Q.
Who must apply for TAN?
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Why TAN is required?
TAN is mandatory for:
- Filing TDS/TCS statements
- Generating TDS/TCS challans
- Issuing TDS/TCS certificates
- Maintaining proper documentation
Q.
What is duplicate TAN?
Q.
If a duplicate TAN has been allotted, which TAN should be used?
Q.
What should be done if a duplicate TAN is allotted by oversight?
Q.
How to apply for TAN?
Steps to apply:
- Visit the NSDL website
- Select “TAN” under Services & click “Apply Online”
- Choose “New TAN” and the relevant deductor category
- Fill & submit Form 49B
- Receive acknowledgment (14-digit number)
- Save/print for your records
Q.
Who will allot TAN?
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Can TAN be applied for online?
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Should Government deductors apply for TAN?
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If there are multiple DDOs, must each get a TAN?
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Can separate branches of a company or bank have individual TANs?
Q.
Can the TAN application be made on plain paper?
Q.
Can Form 49B be filled on a typewriter?
Q.
What documents are required with the TAN application?
NSDL e‑Governance Infrastructure Ltd,
5th Floor, Mantri Sterling,
Model Colony, Pune‑411016
Super‑subscribe: APPLICATION FOR TAN – [Ack No.]
Q.
What if Form 49B is incomplete?
Q.
What is the fee for TAN application?
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How will the new TAN be communicated?
TAN will be sent via:
- Post (if address provided)
- Email (if provided)
- Displayed online with acknowledgement for e-applications
Q.
How to find your TAN if forgotten or not received?
You can:
- Visit a TIN Facilitation Centre
- Use “Know Your TAN” on the Income Tax portal
- Check via PAN or TAN lookup online
Q.
Is a separate TAN needed for different types of payments?
Q.
How to check the status of your TAN application?
Q.
Can an e-TDS return be filed without a TAN?
Q.
How to update address or details linked to TAN?
Q.
Which incomes are deemed to be received in India?
• Contribution by Central Govt or employer under pension scheme (Sec 80CCD).
• Transfer of employer contribution and interest from unrecognised PF to recognised PF.
Q.
What incomes are deemed to have accrued or arisen in India?
• It is earned in India via business connection, property, assets or other income sources.
• It is received in India, by the taxpayer or on their behalf.
• It accrues or arises outside India but is attributable to business activity in India.
Q.
What is the objective of FEMA?
• Facilitate external trade and payments.
• Promote order in the foreign exchange market.
• Simplify foreign-exchange law.
• Regulate non‑resident investments.
• Manage forex resources and address payment imbalances.
Administered by RBI and ED; applies across India and abroad to Indian citizens/agencies.
Q.
When is a business connection said to be established?
• Its agent in India can conclude contracts (other than goods purchases).
• Agent holds stock of goods/merchandise and delivers on behalf.
• Habitually secures orders in India for itself or related non‑resident.
Only income attributable to that business connection is taxable in India.
Q.
What are other provisions under Income‑tax Act applicable to non‑residents?
• RNOR taxed on Indian and controlled foreign business income.
• Tax on received or deemed income in India (salary, dividend, interest).
• DTAA relief availability.
Q.
What is the extent and application of FEMA 1999?
Q.
What are capital account transactions?
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What are current account transactions?
Q.
Can foreign nationals resident in India open resident accounts?
Q.
Can a resident open a foreign currency denominated account in India?
Q.
Is residential status relevant for taxability?
Q.
What are the residential status categories for individuals?
2. Resident but Not Ordinarily Resident (RNOR)
3. Non‑Resident (NR)
Q.
Will Indian citizenship alone make someone tax-resident?
Q.
Residential status categories for an HUF?
Q.
How is residential status determined for individuals?
• ≥182 days in India, or
• ≥60 days + ≥365 days over past 4 years.
Exceptions apply to Indian citizens abroad or on ships.
Q.
How is residential status determined for an HUF?
ROR if karta has ≥2 years in India during last 10 and ≥730 days in last 7.
Q.
How is residential status determined for a company?
Q.
Residential status categories for other persons?
Q.
Which incomes are charged to tax in India?
• Income from salary
• House property
• Business/profession
• Capital gains
• Other sources
Corporate tax applies to company profits.
