IT returns

I write this mail to ask you only 2-3 questions related to filing of IT Returns, please answer them for me as people are giving me conflicting view points.

I was an individual self employed business man, a computer consultant for schools.  Whenever I would file my income tax returns and get them prepared by a CA, he would take the following into expenses into account

1. Petrol
2. Hotel bills - treated as staff welfare
3. Computer, accessories or gadgets as additions to the business - capital assets and we would show depreciation on computers
4. Salary paid to my helper as business expense
5. Medical bills for staff welfare.
6. ATM withdrawals or self cheque withdrawals were treated as drawings.
7. Motor vehicle depreciation

Almost a year back my business was closed and I work for an organisation as an employee for a salary.  People say that now since I no longer run a business but am a salaried person.  I cannot show petrol, hotel or medical bills and treat withdrawals as drawings any more, since we don't prepare statement of accounts and balance sheets for individuals.  

You only fill up form 16 and show proof of any investments you have made for tax deduction purpose (insurance, mutual funds, PPF, etc.,) or any other donation u/s 80(g).

Is this true Sir, can I show motor vehicle depreciation, please clarify and what is the correct form 16 to be filled up for salaried persons, the Income tax website to file it-returns online is confusing.

Looking forward towards your reply. My CA has moved cities and is no longer accessible
Asked 1 year ago in Income Tax from Bangalore, Karnataka
When you are a business man, you can claim all reasonable expenses incurred in connection with your business. As a salaried person, such expenses cannot be claimed. It is because your salary income will be computed by giving exemptions for HRA, LTA, PF and valuation of perquisites like company leased accommodation, conveyance, medical expenses. All these expenses are personal in nature but you still get benefit of exemption / deduction. 

It is the responsibility of the employer to compute your tax liability and deduct tax accordingly. In this process, he can consider other incomes, apart from salary, as declared by you, except loss from business, capital gains etc. He can also consider the investments made by you and allow deductions u/s 80C etc. The employer thus acts more or less like a representative of Income Tax Department to determine your tax liability and deduct it from your salary. Hence, the filing of tax returns for salaried persons is normally simple.
B Vijaya Kumar
CA, Hyderabad
290 Answers
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You have to file return of Income in form no 1 and be done. It is true you cannot claim expenses against salary income except for rent for house occupied against HRA or deduction u/s 80GG.
Vijay N. Kale
CA, Hyderabad
248 Answers
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Yes it is true that if you are having business then only the above expenditures can be claimed. 

Since now you are salaried person you cannot claim all the above expenditure from your salary income.
Shyam Sunder Modani
CA, Hyderabad
955 Answers
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Hi! First of all, the Form 16 has to be issued to you by your employer (the organisation). Your employer will deduct tax, if any payable by you, and issue the Form 16. Based on the Form 16 issued, you or your CA will file your income-tax return. So don't fret over the complicated Form 16! You will have to fill ITR-1.
In case your employer has not issued a Form 16 to you, based on your salary income, your income tax return can filed.

Secondly, it is true that salaried persons cannot claim the above expenses. You can save tax by way of those investments for tax deduction purpose. However, you do have certain tax benefits like conveyance (Rs. 1600 per month or Rs. 19,200 per annum), house rent allowance (HRA - based on your salary and rental expense), medical expenses (upto 15,000 per annum), etc.

In case your employer is not issuing a Form 16 to you, you may declare your income as "Income from Consultancy Services" and claim all the above expenses as earlier. However, in this case, your employer will have to necessarily show you as a professional instead of an employee.

Happy to help you, any further!
Rohit R Sharma
CA, Mumbai
719 Answers
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