income tax return
Choosing the right form and using the right section while filing Income Tax Return (ITR) is confusing for many taxpayers. Especially after retirement, those earning professional income along with pension and investing in share and mutual funds often face the question of which ITR form to fill so that the tax burden is reduced and the rules are also followed.
Recently a retired bank officer told that after retiring from the public sector bank, he teaches in different MBA institutes in Mumbai and also does consultancy with banks. They also get pension. Now some of his friends suggested that he file returns under Section 44ADA, which can reduce the tax.
There is no need to keep account books
On this, tax expert Amit Maheshwari (AKM Global) says that Section 44ADA (Presumptive Taxation Scheme) can be beneficial for such professionals. Under this scheme, if the annual gross receipts of a consultant or professional is less than ₹75 lakh (and cash receipts are not more than 5%), then he can consider only 50% of his total professional income as taxable income. This eliminates the need to maintain account books and makes filing easy through ITR-4 (Sugam) form. However, separate deduction of business expenses cannot be taken in this scheme. Also, it will be necessary to treat pension as salary income and show it in a separate head.
Income in capital gains category
On the other hand, it is also important for share and mutual fund investors to choose the right form. According to tax advisor Shubham Aggarwal, if a person’s income is limited to only salary (less than ₹ 50 lakh), income from a house, interest and dividends, then he can file ITR-1. But if he has earned profit or loss by selling shares or mutual funds, then he will have to fill ITR-2, because it comes under the category of capital gains. Experts believe that choosing the wrong form can increase the risk of notice, hence taxpayers should file returns only after understanding the nature of their income or if necessary, seek professional advice.