New return form may not be mandatory

New Delhi: At last there may be some good news for salary earners after all.

The much-criticized new income tax return form (form 2F) may not be mandatorily applicable after all. Or so suggests a reading of the fine print.

The background:

Currently, individuals, including the salaried class have the option of filing their returns by using either:

• Saral (Form 2D): Which is the Income-tax return form specified for non-corporate assessees other than persons claiming exemption under section 11 OR
• Naya Saral (Form 2E): Income-tax return form for resident individuals and HUFs not having income from business or profession or capital gains or agricultural income.

The Notification (No. S.O 848 (E) dated 1st June 2006) which deals with the new form (Form 2F) seeks to substitute only Naya Saral and not Saral. Which means for the current year and in the future, taxpayers will always have the option of using Saral (form 2D) to file their tax returns. The dreaded Form 2F need not be used.

Thanks are due to Lucknow based chartered accountant (CA) and Oracle functional consultant Bhupesh K Shah for first bringing this to my notice. Other fellow CAs too that I have talked to seem to echo this sentiment.

According to Shah, there is no plausible reason why any person would opt for form 2F when the much simpler Saral (2D) 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.

In any case, to summarise:

• For FY 05-06 (up to July 31): Taxpayers may use Saral (2D) or Naya Saral (2E) or 2F without having to submit the cash flow.
• From FY 06-07 (next year) onwards: Taxpayers may use Saral (2D) or new Form 2F (cash flow will be mandatory if form 2F is submitted).

A Caveat

To reiterate, the above is as per a plain reading of the Ministry of Finance notification. It is possible that Central Board of Direct Taxes (CBDT) never intended for the taxpayer to have any such option of continuing the use of Saral (2D). If that were indeed the case, another notification amending the existing notification would have to be urgently issued. Else, it would only confound the existing confusion

The writer, Sandeep Shanbhag, is Director of A N Shanbhag NR Group, a Mumbai based tax and investment advisory firm.