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No filing of tax returns if salary is only income

Last updated on: February 28, 2011 19:09 IST

No filing of tax returns if salary is only income

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In a big relief from cumbersome tax filing process for the salaried class, Finance Minister Pranab Mukherjee on Monday proposed to exempt them from filing tax returns unless they have other sources of income.

The government will be issuing a notification exempting 'classes of persons' from the requirement of furnishing income tax returns, said the Memorandum to the Finance Bill 2011.

Salary earners having an income of less than Rs 5 lakh will not have to file tax returns from this year.

"Salaried people, may be up to Rs 5 lakh...they need not file the (income tax) return," CBDT chairman Sudhir Chandra said.

The exemption from filing tax returns come into effect from the assessment year 2011-12.

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Image: Pranab Mukherjee with Ministers of State of Finance, SS Palanimanickam and Namo Narain Meena.

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The decision, which will come into effect from June 1, 2011, will reduce the compliance burden on small taxpayers, it added.

In case such a salary earner has income from other sources like dividend, interest etc. and does not want to file returns, he will have to disclose such income to his employer for tax deduction, Chandra said.

The Form 16 issued to salaried employees will be treated as Income Tax Return, he added.

"Therefore, in cases where there is no other source of income, filing of a return is duplication of existing information," the Memorandum said.

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Image: Documents of the General Budget 2011-12 brought in Parliament House premises.
Photographs: Courtesy, PIB.
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No filing of tax returns if salary is only income

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The Income Tax department is open to examining a proposal to exempt them from the annual chore.

Asked whether the department would think about doing away with Income Tax returns for employees, who had no other income apart from salaries in a financial year, Central Board of Direct Taxes chairman Sudhir Chandra said the department would certainly consider the proposal.

He agreed that for a substantial chunk of salaried employees, savings bank interest is the only additional income and that in most cases, this not substantial.


Image: Good news for taxpayers.

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This proposal, if approved, will benefit a large section of people and would reduce the I-T department's workload in a big way.

Of the country's 35 million taxpayers, roughly half are salaried employees.

The proposal to do away with returns for salaried taxpayers was earlier internally mooted within CBDT a few years ago.

The argument in favour of the proposal was that income records for this class of taxpayer were available with both employers and banks.

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Image: Salaried taxpayers to benefit.

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No filing of tax returns if salary is only income

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Chandra also promised small taxpayers another major relief. He said the I-T department is planning to release all small-value refunds before March 31.

"I will ask my officials to give most refunds by the end of the current financial year," he said.

"We will try to clear most refunds in a month. At least small refunds can be given by March 31," Chandra added.

The newly-appointed chairman said he would communicate this to his officials.

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Image: Relief for small taxpayers.

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No filing of tax returns if salary is only income

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Some of the refunds will be given to taxpayers directly through State Bank of India under the refund banker scheme.

Under this, tax refunds are sent to taxpayers by State Bank of India, either through the electronic clearing service mode or in physical form.

The scheme was launched four years ago in Delhi and Patna and later extended to other cities.

In 2009-10, the I-T department gave over Rs 58,000 crore (Rs 580 billion) in refunds, which was 50 per cent more than the previous year.

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Image: State Bank of India.

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CBDT has increased its target for processing refunds to Rs 70,000 crore (Rs 700 billion) in the current financial year.

Refunds increased by 19.5 per cent to Rs 44,000 crore (Rs (Rs 440 billion) up to December, 2010.

The I-T department has opened a Central Processing Centre in Bengaluru for faster processing of claims for electronically-filed returns.

It will roll out three more centres in the Manesar, Pune and Kolkata.


Image: Refunds increased by 19.5 per cent.

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