ITR-1 ( for Salary Income ) is one of the most widely used forms by salaried individuals to file their income tax returns (ITR). The form is now available on the income tax department’s e-filing website. Therefore, you can easily submit your ITR once your employer gives you Form-16 for FY 2018-19.
Not only is ITR-1 different from last year, but even Form-16 has also changed this year. As per a notification issued by the Central Board of Direct Taxes (CBDT), the new format of Form-16 will have detailed information which includes the complete break-up of tax-exempt allowances paid to you by your employer and deductions from salary income claimed by you and declared to your employer.
However, unlike last year, you don’t have to collect salary slips as ITR-1 and Form-16 are now synchronized, making it easier to fill in your details.
Here’s everything you need to know about filling your salary details in ITR-1 for FY 2018-19.
This year, ITR1 requires details of salary income to be provided under four sub-heads as follows:
a) Gross Salary
b) Allowances to the extent exempt under section 10
c) Net Salary (a-b)
d) Deductions under section 16
Once all the data is entered by you under the four sub-heads as mentioned above, the fifth sub-head, i.e., ‘Income chargeable under the head Salaries,’ will be automatically calculated. Here is a look at each head in detail.
(i) Salary as per section 17(1)
(ii) Value of perquisites as per section 17(2)
(iii) Profits in lieu of Salary as per section 17(3)
The information required in ITR-1 is available in Part-B of Form-16.
Part-B of Form-16 starts with the head ‘Gross Salary’. The break-up under the head, ‘Gross Salary’, is the same as what is required in ITR-1. You just need to copy and enter the information in ITR-1.
B) Allowances to the extent exempt under section 10
This head contains information about the partially or fully tax-exempt benefits received from your employer, such as house rent allowance (HRA) and leave travel allowance (LTA). In the ITR-1 form, in this section, you have to fill the information of only those allowances that are fully or partially tax-exempt. This information will be available in Part-B of Form-16 under the head ‘Allowances to the extent exempt under section 10.’
To understand which of the allowances you receive will reflect under ‘Allowances to the extent exempt under section 10’, you need to know whether the benefits received by you as per your salary structure are either partially or fully taxable. For example, the dearness allowance (usually received by government employees) is fully taxable. If a benefit is fully taxable, then it will be added to the Salary as per section 17(1).
On the other hand, HRA can be fully taxable if you are not living on rent or have not paid any rent. However, if you have paid rent for living in rented accommodation, then a portion of HRA received by you can be tax-exempt if you meet the conditions specified. Click here to know about the tax-free limits of allowances.
Example. Suppose, in FY 2018-19, your employer has paid you Rs 1.2 lakh as HRA. However, out of this, you have paid only Rs 96,000 as annual rent to your landlord. Rules governing HRA will determine the tax-exempt portion of the total HRA you have received during the year. Let us assume that as per the rules, Rs 72,000 of HRA is tax exempt and Rs 48,000 is the taxable portion.
The sub-head ‘Allowances to the extent exempt under section 10’ in Part B of your Form 16 will show the tax-exempt portion of HRA, i.e., Rs 72,000. This figure of Rs 72,000 is required to be copied and entered in the row with the same name in ITR-1 by selecting it from the drop-down menu.
The drop-down menu has 14 options, and an individual is required to select and mention every tax-exempt allowance received, as mentioned in Form-16.
C) Net Salary
Once you have entered the details in the heads, as mentioned above, then the ITR software will automatically calculate your net Salary. This amount should match with the net Salary specified in your Form-16.
D) Deductions under section 16
After calculating the net Salary, you have to claim the deductions. Unlike the commonly known deductions such as those under section 80C, section 80D and so on, you can claim deductions under section 16 only if you have salary income or pension. These deductions are:
a) Standard Deduction
b) Entertainment Allowance
c) Tax on employment/professional tax
These deductions will be available in Part-B of your Form-16. Standard deduction of Rs 40,000 will be available to you for FY 2018-19. Deduction on entertainment allowance received is available to government employees only. If you have paid any professional tax to the state government, then the tax amount paid can be claimed as a deduction.
E) Income chargeable under the head ‘Salaries’
Once all the details are entered in the rows as mentioned earlier, then the figure corresponding to ‘Income chargeable under the head Salaries’ will automatically be calculated by the ITR software. This auto-calculated figure should match with the amount mentioned in your Form-16.