Pay Your Taxes Online

Online payment of taxes has been introduced to make your life as a taxpayer much easier. Paying taxes has never been simpler with the authorities introducing the mechanism of online payment. The use of electronic means to deliver services is not only an efficient and speedy process, but it also facilitates a transparent process for disseminating information and delivering it to the taxpayers of the nation.

Online payment of taxes helps you save time, is convenient and is paperless. You could be working in office or relaxing at home — the facility to pay your taxes is just a click away. To make use of this facility, all you need is an account with a bank that provides net-banking and also e-tax payment facility. State Bank of India, HDFC Bank, IDBI Bank, UTI Bank and Union Bank of India are some banks that provide the e-tax payment facility.

The procedure for payment of taxes online is simple and the userfriendly instructions make it even more attractive. To start with, you need to log on to NSDL-TIN website and click on the ‘e-Tax-online payment’ option. You will then be directed to a list of banks that provide the e-tax payment facility. Depending upon the bank you hold an account with, you need to click on the option and choose the tax challan applicable in your case.

If it is a tax deducted at source payment, challan No 281 will apply; else challan Nos 280, 282 or 283 will be applicable. Challan No 280 is used for payment of advance tax and self-assessment tax. Challan No 282 is used for payment of miscellaneous taxes like gift tax, wealth tax, estate tax, expenditure tax etc. Challan No 283 is used for payment of fringe benefit tax or banking cash transaction tax.

On opting for the challan type applicable, particulars such as the permanent account number (PAN) or tax deduction account number (TAN) as may be applicable, name and address of the taxpayer, relevant assessment year, type of payment and name of the bank will be displayed. These particulars will need to be filled in carefully, as an incorrect PAN/TAN (if it does match the records of the income tax department) will not allow further processing of the payment. The mandatory fields are highlighted and to ensure smooth processing, these fields need to be populated. You will then reach the net banking site provided by your bank where you hold your account and with the use of the allocated customer ID and password, the payment will be processed.

Once the process is complete and the bank processes the online transaction, you will be issued an acknowledgment indicating the challan identification number (CIN). After a week of making the payment, the status of the payment may be verified at the NSDL-TIN website under section ‘Challan Status Inquiry’. The alternate way to verify the payment of taxes is the online bank statement.

Apart from being relieved of the hassles of visiting the bank for paying taxes and the additional paper work, an added advantage is that online payment does not require attaching the acknowledged counterfoil with your return. Quoting the challan identification number is sufficient proof for the tax authorities. Imagine, not having to worry about the challan copies and the related paperwork.

As for your security concerns, the tax authorities assure the taxpayers that the transmission through the NSDL-TIN website is encrypted and is with the secure socket layer authentication.

Now Get Used To ITRs, No More Form 16,

What will the new tax return forms mean to you? Check out the new features and implications

Individual income tax return (ITR) forms have witnessed many changes over the past few years. This year, the government proposes to introduce new tax return forms, in lieu of the existing ones, including the Saral (Form 2D). In this connection, new forms have been drafted by the Central Board of Direct Taxes (CBDT). These forms are expected to be notified in mid-May.

New tax return forms

For assessment year ’07-08 (financial year ’06-07), the following forms are proposed to be introduced for individual/Hindu Undivided Family (HUF) taxpayers:

ITR -1: This form can be used by individuals having salary and interest income only and no other income. This form is primarily to be used by salaried individuals who do not have any other income except interest income.

ITR -2: This form can be used by individuals/HUF having income from any source except from business or profession.
This form is to be used if besides salary and interest income, the individuals/HUF have income from house property, capital gains (short-term and long-term) and income from other sources.

ITR -3: This form is to be used by individuals and HUF who are partners of firms and don’t have proprietary business or profession. This form is to be used by partners of the firms for filing their personal tax returns.

ITR -4: This form is to be used by individuals/HUF having proprietary business or profession.
It will be interesting to note a few of the important features of the proposed forms for individual taxpayers, as follows:
No cash flow statement: Form 2F introduced last year required individuals to furnish their cash flow details.

Due to various representations made to the government, the said form was not made compulsory and an option was given to individual taxpayers to use other forms.
The new individual tax return forms do not contain any such requirement of furnishing cash flow statements/details. New requirement: Annual Information Return (AIR) transaction, a new requirement in respect of specified transactions, is being introduced in the proposed tax return forms.

Accordingly, an individual/HUF will be required to furnish information in respect of specified transactions undertaken by him, that are reported through AIR by the other parties.
Therefore, it will be important to take note of the transactions that are currently being reported to the tax authorities under AIR by companies, banks and mutual funds (MFs).
These include: cash deposits of Rs 10 lakh or more in a year in savings account (by banks); credit card payments exceeding Rs 2 lakh (by banks/ credit card companies); purchase of mutual funds for Rs 2 lakh or more (by mutual funds); purchase of bonds or debentures for Rs 5 lakh or more (by company/ institution issuing such bonds or debentures); purchase of shares for Rs 1 lakh or more (by company issuing shares through public or rights shares); purchase or sale of immovable property for Rs 30 lakh or more (by registrar or sub-registrar) and purchase of RBI bonds for Rs 5 lakh or more (by RBI).

Form 16 may not be filed: The individual tax returns have been designed to be annexure-less. Unlike in the past, no separate annexure for computation/other information is to be furnished along with the return. Therefore, it is likely that once complete information in respect of tax withheld at source as contained in Form 16 is furnished in the return, then Form 16 may not be required to be filed along with the return.
All the necessary information is to be furnished in the specified schedules of the tax return form only. These schedules also provide guidance regarding the step-by-step method of computing the taxable income under each head — salaries, income from house property, capital gains, etc.
Electronic filing: The individual tax return forms can be filed electronically, even though this has not been made compulsory for the current tax year.
Tax return preparer information : If the tax return has been prepared by a tax return preparer (TRP), then his/her name and identification is to be furnished in the tax return form. Further, the TRP is also required to sign the tax return form.

What’s the final word?

The basic information required to be furnished in the proposed return forms remains the same as the old forms. Nevertheless, there are a few important deviations which should be taken note of.

Source

Impact of Fringe Benefit Tax Imposed on Esops

The proposed law effective April 1, ’07 has shifted the focus from employee taxation to employer taxation on Esops. The benefit arising at the time of exercise of shares by the employees will be liable to FBT at an effective rate of 33.99%. Correspondingly, any benefit on account of Esops as perquisites is out of employee taxation.

Potential FBT impact is uncertain around the value of FBT to be taxed in the employer’s hands. Let us consider an example where employee A and employee B are granted Esops on the same date, but they exercise on different dates. The exercise price is Rs 10.

Employee A exercises his options in year 3 when market value (MV) on exercise date is Rs 30 and employee B in year 4 when MV is Rs 40. The value of taxable benefit for FBT purposes will be Rs 20 and Rs 30 respectively. Therefore, even a different date of exercise could impact the FBT liabilility. Companies find themselves in a quandary as to which other factors may influence their FBT liability. In case of a globally mobile work force, there will be issues around double taxation where foreign companies grant Esopsto their employees. Foreign companies may be liable to pay FBT on Esops in India and the employee may suffer personal taxes in the home country on the same benefit, leading to double taxation.

Confusion also surrounds the impact of the proposed law on Esop variants such as restricted stock units and stock appreciation rights and nothing has been clarified at present. Some clarifications from the government in this aspect are necessary. Taxation of Esops in the hands of the employer is something which does not find precedent in other countries. In fact, it is surprising to note that the government has sought to bring Esops within the FBT ambit, as clearly these are not in the nature of collective benefits but are employee specific.

In the US, tax treatment of Esops depends on whether the stock option plan is qualified or nonqualified. Options provided to employees under qualified plans are not subject to tax at the time the option is granted or at the time the employee exercises the option and buys the stock. Tax is only levied as capital gains tax when the employee sells the stock.

Options provided to employees under a non-qualified plan are taxed when it is granted, if the option has a readily ascertainable MV at that time. The exercise of a non-qualified stock option triggers a taxable event. An employee recognises ordinary income in the amount of the value of the stock purchased, less any amount paid for the stock or option. When the stock is sold, the difference between the sale price and the MV at the date of exercise, if any, is taxed as capital gain.

Esops may soon be history


ESOPS may soon be history. The proposed amendment in Budget ’07 may even eliminate the whole concept of Esops from the Indian scenario.

Why Esops will not be attractive now: First, the employer will be burdened with an effective post-tax cost of 45.54%, which is a huge cost for any company as it will hit its bottomline. Second, the employer is being made to pay tax on the benefit derived by the employee due to appreciation in the shares due to market forces and not because of any cost incurred by the employer. For example, say a new start-up company had granted options five years back at the face value of Rs 10 each.

The company is now listed and its shares are traded on the Indian stock exchange. The employee’s exercise period has commenced and he is entitled to exercise his options and covert them into shares. Say, now the fair market value is Rs 120. Due to the proposed amendment, the employer will have to pay FBT on Rs 110 ( Rs 120 less Rs 10). Third, the exclusion from the taxability as perquisites has been removed. Therefore, effectively, it means that the benefit still remains a perquisite.

Accordingly, it may still be taxed as a benefit in the hands of the employee, besides FBT, resulting in double taxation of the same benefit. Fourth, in most of the countries, the benefit arising under Esops is taxed in the hands of the employee. Therefore, if this benefit is taxed both in India and overseas, then the employees will not be able to claim credit for the same under the respective Double Taxation Avoidance Agreements between India and other countries.

Then, many foreign companies grant Esops to the employees of their subsidiary companies in India. As clarified by CBDT earlier, FBT is payable by the foreign company only if it has employees based in India.

Therefore, an issue arises whether there will be no FBT in case of Esops granted by foreign company if there is no employee based in India. Further, it remains to be seen whether FBT is payable by the foreign company or the Indian employer. There are many interpretation issues in the proposed provisions which may lead to unnecessary prolonged litigation. For example, it as not been clarified whether the provisions will apply to new Esops or the FBT will get triggered even in respect of the old Esops where grants have been made in the earlier years.

If the second one is the intent of the proposed legislation then it will be unfair to the employers as they have been caught unawares and are being made to pay tax for the contractual arrangements (Esops) entered into with employees based on the prevailing tax law in the earlier years, i.e. when there was no income tax either for the employee (personal tax) or for the employer (FBT) when the Esops were granted.

I-T exemption limit may be raised to Rs 1.5 lakh in 2007

Feb. 24 - With direct tax revenues being buoyant this year, taxpayers could look forward to some relief in the form of an increase in income-tax exemption limit from Rs 1 lakh at present to Rs 1.5 lakh per annum.

According to highly placed sources in the Government, since the income-tax rates are already quite low compared to many other countries at 10 per cent, 20 per cent and 30 per cent, there is little scope for the Finance Minister, Mr P. Chidambaram, to reduce them further.

On the contrary, by raising the exemption limit from Rs 1 lakh to Rs 1.5 lakh, he would be providing relief to a large category of the lower income group among taxpayers.

This would also result in letting off a large number of marginal tax payers from the tax net, particularly in view of the rising prices that have hit the household budget of the low and middle-income group of taxpayers, the sources said.

The move is also viewed as a sort of political sop in view of the forthcoming elections in several States, particularly Uttar Pradesh, traditionally a decisive State in the political formation at the Centre.

The total direct tax collections between April 1, 2006 to February 15, 2007 stood at Rs 1,61,777 crore which is 39.5 per cent higher compared with Rs 1,15,788 crore in the same period of the previous financial year.

During this period, income tax collections, including fringe benefit, securities and banking transaction tax, stood at Rs 62,040 crore.

This represents a 32 per cent growth over collections in the corresponding period of the previous year.