The salaried class may be in for some good news after all.
The much feared and criticised new Income Tax Return Form (Form 2F) may not be compulsory after all. Or so suggests a detailed analysis of the fine print.
Currently, individuals -- including salary earners -- have two options to choose from while selecting the income-tax form for filing their tax return. One is 'Saral' or Form 2D. The other one is 'Naya Saral' or Form 2E.
While Saral is applicable to all individuals regardless of the source of income, Naya Saral is applicable to only those who do not have business income or capital gains or agricultural income.
In short, salary earners can use either one.
Now, the Central Bureau of Direct Taxes (CBDT) Notification -- No. S.O 848 (E), dated June 1, 2006 -- which deals with the new form (Form 2F) seeks to substitute only Naya Saral with Form 2F and not the original Saral.
Which means for the current year, and in the future, taxpayers will continue to have the option of using Saral which is far simpler than Form 2F.
Thanks are due to Lucknow-based chartered accountant and Oracle functional consultant Bhupesh K Shah for opening a debate on this point. Other fellow chartered accountants, that I talked to, seem to agree.
According to Shah, there is no plausible reason why any person would opt for Form 2F when the much simpler Saral is still available. There is simply too much information that Form 2F requires for the taxpayer's comfort. If the only idea was to compare expenditure with income levels, a simple prescribed format of major expenses could have been made a requisite by way of an annexure.
To summarise:
For FY 05-06 (up to July 31) : Taxpayers can use Saral (2D) or Naya Saral (2E), or the new Form 2F.
From FY 06-07 (next year) onwards: Taxpayers may continue to use Saral (2D) or new Form 2F for which cash flow will be mandatory.
A caveat
To reiterate, this is as per a plain reading of the fine print of the Ministry of Finance notification. However, it is possible that the CBDT never intended the taxpayer to have any such option of continuing the use of Saral. If that is the case, this notification will have to be suitably amended.
It's not as if there is no precedent. CBDT has in the past withdrawn or amended already released notification. The recent notification on Equity-Linked Savings Schemes (ELSS) is a case in point.
However, till such time, salary earners can breathe easy.
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The writer is Director of A N Shanbhag NR Group, a Mumbai based tax and investment advisory firm. He may be reached at sandeep.shanbhag@gmail.com
