New tax form to capture expenditure

New Delhi: The government issued a new four-page Income Tax Return Form (Form 2F) on Friday.

The new tax return form will be effective for the Assessment Year 2006-07 as it replaced the older version Saral.

The government officials claimed that the new form is easier to understand and fill up.

A new feature of the new Form is that unlike before, it attempts to capture expenditure of an individual and not just his income.

The items that will involve expenditure for the purpose of filing the return have been identified.

"The Form has been designed in a manner that it is easy to understand and can be filled up with little or no help," said Revenue Secretary K M Chandrasekhar.

He said assessees will now have the option of filing the return electronically or by way of a hard copy for this assessment year.

From next year, the returns will be accepted only in an electronic form.

"It will reflect the actual expenditure and cash inflow of an individual. The tax payers will also have to give the opening and closing balance and the two will need to be matched," said the top Finance Ministry official.

Senior officials of the Central Board of Direct Taxes (CBDT) were also present on the occasion.

The Form states that outgoings during the year will include:

• Expenses, investment under which deduction under Chapter VI-A
• Outgoings by way of other investments and other outgoings.

"People at present do not report their actual expenditure. As many as 50 per cent of the assessees have been indicating that their expenditure per annum is near to Rs 50,000. This is gross under-reporting," said the officials.

The Form can be used by resident individuals and the tax payers who do not have:

• Profits and gains of business or profession
• Capital gains
• Agriculture income
• More than one house/property
• Any claim for relief under Section 89 in respect of arrears or advance of salary.

He said the Form is applicable with immediate effect.

However to allow sufficient time to taxpayers to familiarise with this Return form, the existing one-page 'Saral Form 2E' can also be used up to July 31, 2006.