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Scheduled Tribes urged to file Income Tax Returns despite exemptions

ByArenjungla Kichu

Jul 30, 2024 #exemption, #IncomeTax, #ScheduledTribe, #ST

DAJ Sawkmie IRS, Principal Commissioner of Income Tax, Shillong, emphasized the significance of filing Income Tax Returns (ITR) even for members of Scheduled Tribes (ST), who are generally exempt from income tax under Section 10(26) of the Income Tax Act, 1961.  Sawkmie was speaking at the Taxpayer Outreach Program 2024, organized by the Office of the Principal Chief Commissioner of Income Tax, NER, Guwahati, at the DC Conference Hall in Mokokchung, Nagaland.

Principal Chief Commissioner of Income Tax (NER) Chaitali Panmie IRS
Principal Chief Commissioner of Income Tax (NER), Chaitali Panmie IRS, speaking during the Taxpayer Outreach Programme 2024 at DCs Conference Hall, mokokchung on 29 July 2024. (Photo: DPRO Mokokchung)

Section 10(26) provides tax exemptions to individuals from Scheduled Tribes residing in specified regions, including Tripura, Mizoram, Manipur, Nagaland, Assam, Arunachal Pradesh, and Ladakh. According to Sawkmie, exemptions are granted under certain conditions: The individual must belong to a Scheduled Tribe and the income source must originate from a Scheduled Area.

Sawkmei also clarified that ST members must obtain a certificate of exemption under Section 197 of the Income Tax Act. This exemption covers various income sources, including salary, interest, house property, business, capital gains, and dividends from certain shares.

Despite the tax exemptions, Sawkmie highlighted the critical need for ST members to file Income Tax Returns (ITRs). Failure to do so, he said, can lead to complications such as difficulties in obtaining visas, government tenders, and loans. He also warned of potential penalties and legal consequences.

Sawkmie further elaborated that specific circumstances necessitate the filing of ITRs such as expenditure on foreign travel exceeding Rs 2 lakhs, electricity bills surpassing Rs 1 lakh and deposits exceeding Rs 50 lakhs in savings bank accounts.

Scheduled Tribes urged to file Income Tax Returns despite exemptions

Sawkmie noted that after filing an ITR, individuals could petition for a refund. He also reminded salaried individuals that the deadline for filing ITR is July 31, 2024.

When asked about the tax liabilities of mutual funds, stocks, and shares for tribals, Sawkmie acknowledged these as “grey areas” that require judicial clarification.

Tax exemptions and TDS compliance

Rintei Renthlei, IRS, Additional Commissioner of Income Tax (Tax Deducted at Source), Shillong, presented the practical aspects of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). Renthlei also highlighted key provisions for Trusts, NGOs, and Hospitals, as well as compliance requirements for Scheduled Tribes (ST).

TDS requires tax to be deducted at the point of income payment by the payer, which is then remitted to the government. It ensures that tax is collected directly from the source of income. TCS is collected by the seller from the buyer on sales, as specified under Section 206C of the Income-tax Act. This tax is then deposited with the tax authorities.

Renthlei discussed need to obtain Nil Deduction Certificate under Section 197 of the Income Tax Act to avoid TDS. She advised submitting Form No 13 to the TDS Assessing Officer along with scanned original ST documents, proof of income, and an estimated consolidated income statement.

TDS applies to income exceeding Rs 2, 40,000. In cases of missing or invalid PANs, the TDS rate is set at 20%.

Renthlei compared the old and new tax regimes, noting that the new regime includes a tax rebate of Rs 25,000 for individuals with total income up to Rs 7 lakhs. She highlighted that while the government is encouraging adoption of the new regime, individuals should select the tax regime that offers the most benefits based on their deductions.

TDS Deduction occurs monthly at an average tax rate. She informed that employees should choose their tax regime at the beginning of the financial year and inform their Drawing and Disbursing Officer (DDO). Changes in regime can only be made at the time of filing the Income Tax Return (ITR), she added.

Income tax filing guidelines and compliance

S Sadananda Singh, IRS, Deputy Commissioner of Income Tax (DCIT), HQ Guwahati, provided essential guidance on income tax filing. Singh emphasized that individuals with an annual income exceeding Rs 2.5 lakhs (or Rs 3 lakhs for senior citizens) are required to file Income Tax Returns (ITR). He also noted that Scheduled Tribes (ST) who are exempt from income tax under Section 10(26) of the Income Tax Act, 1961, but wish to claim a refund, should also file ITR.

Singh advised individuals to register on the e-portal at eportal.incometax.gov.in for filing ITR. The registration requires a valid PAN card, mobile number, email ID, and other essential details.

Singh outlined the various ITR forms available based on income sources:

ITR 1: For residents with annual income up to Rs 50 lakhs from salary, house property, and other sources.

ITR 2: For individuals or Hindu Undivided Families (HUFs) with income from agriculture, foreign sources, etc.

ITR 3: For income derived from professional and business sources.

ITR 4: For presumptive incomes exceeding Rs 3 crores.

ITR 5: For Association of Persons (AOP), Limited Liability Partnerships (LLP), and Body of Individuals (BOI).

ITR 6: For companies.

ITR 7: For companies, trusts, and associations claiming exemptions.

Singh also highlighted critical compliance issues related to cash transactions. Sections 269SS, 269ST, and 269T restrict cash transactions to a maximum of Rs 2 lakhs. Hospitals and banks must adhere to this limit, or they and their clients could face a 100% penalty for violations.

Significance of e-verification process

N Jungio, IRS, Director of Income Tax (Intelligence & Criminal Investigation), Guwahati, provided an in-depth overview of the E-Verification Scheme 2021 and its compliance by taxpayers. According to Jungio, the Income Tax Department collects data from various sources, including Statements of Financial Transactions (SFTs), the Central Processing Centre (CPC), and TDS/TCS statements. This data is displayed in the Annual Information Statement (AIS), which taxpayers can access through their e-Filing accounts. The department uses this information to cross-check with the income tax returns filed by individuals.

If discrepancies or mismatches are detected, a notification is sent to the taxpayer’s registered phone number, email account, and e-Filing account. Taxpayers can verify the correctness of the information and provide feedback through their e-Filing account.

If mismatches persist after due diligence, the department may proceed with the E-Verification Scheme 2021. Jungio noted that many such cases in Nagaland have been addressed through notices issued under Section 133(6) of the Income Tax Act. He stressed the importance of responding to these e-verification notices issued by the IT Department.

Jungio warned that failing to respond could lead to assessment proceedings under Section 148 of the Income Tax Act, potentially resulting in a tax demand. In such cases, taxpayers would need to file an appeal before the Commissioner of Income Tax (Appeals), followed by the Income Tax Appellate Tribunal (ITAT), the High Court, and ultimately the Supreme Court if necessary.

In light of this, he urged individuals to comply with the notices issued under the E-Verification Scheme 2021.

MT

By Arenjungla Kichu

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