Wednesday, April 24, 2024

Key Elements to Address in the Income Tax Return Form for Assessment Year 2024-25

When filling out the Income Tax Return (ITR) form for the assessment year 2024-25, it's important to carefully address and provide accurate responses to specific queries, particularly those that pertain to international tax considerations, significant economic activities, and high-value transactions. Here’s a breakdown of the key elements you need to be prepared to provide information for:

1. Permanent Establishment (PE) and Significant Economic Presence (SEP) in India

  • PE in India: Indicate whether as a non-resident, you have a permanent establishment in India.
  • SEP in India: Declare if there is a significant economic presence in India, focusing on:
    • Aggregate payments arising from transactions with Indian entities.
    • Number of users located in India.

This information is critical as it affects the taxation of income earned from Indian operations for non-residents.

2. Transactions with Jurisdictions Notified under Section 94A

  • If any transaction has been made with persons located in jurisdictions notified under Section 94A of the Income Tax Act, you must disclose this. Transactions in these jurisdictions may be scrutinized due to concerns related to tax avoidance or evasion.

3. Legal Entity Identifier (LEI)

  • If you are expecting a tax refund amounting to ₹50 crores or more, providing the LEI number and its validity date is mandatory. The LEI helps in the identification and verification of legal entities engaged in financial transactions.

4. Return Filing under Seventh Proviso to Section 139(1)

  • Even if your income is below the taxable threshold, if you have engaged in significant financial transactions, you need to file an ITR. Specific questions you'll need to address include:
    • Whether you have deposited more than ₹1 crore in one or more current accounts.
    • Whether you have incurred more than ₹2 lakhs on foreign travel.
    • Whether your expenditure on electricity exceeded ₹1 lakh during the previous year.
  • Additionally, other high-value financial activities might also necessitate filing, such as significant sales or turnover, extensive receipts in a profession, high TDS/TCS, or substantial savings account deposits.

General Advice for Filling the ITR Form:

  • Accuracy is Key: Ensure all information provided is accurate and verifiable.
  • Documentation: Keep all relevant documents handy to support the entries in your ITR, such as bank statements, receipts, and records of transactions.
  • Consult Experts: If certain sections are complex, particularly around PE, SEP, or international transactions, consider consulting with a tax professional.
  • Timeliness: File within the designated timeline to avoid penalties and interest on any due taxes.

By thoroughly addressing each of these sections, you ensure compliance with the tax laws and contribute to a transparent tax filing process.