Theme: Money

Order Cheque

An order cheque is a cheque where only the person or party in whose name the cheque has been drawn, can withdraw the cash. The person collecting the cheque has to give an identity proof to encash the cheque. In such cheques, you have to strike out the words “or Bearer” and specify the person to whom the cheque is written for. Only then will it become an order cheque.

 

Order Cheque

For illustration purposes only

For Example: If Sumeysh’s name is written on the cheque, only he can present the cheque for payment and get it encashed. No one else will be allowed to withdraw the amount.

The payee can transfer an order cheque to someone else by signing their name on the back of it. This is known as endorsing of a cheque.

Right to Information – Tax

The Right to Information Act 2005 (RTI Act 2005) states that all Indian citizens can access information which is under the control of public authorities.(( Section 4, Right to Information Act, 2005)) For example, if you want to know why your tax returns are delayed, then you can file an RTI application.

If you require any information which is tax related, you can approach the Central Public Information Officer (CPIO) or Central Assistant Public Information Officer (CAPIO) as the case may be, and specify the particulars of the information you require.((RTI, Income Tax Department, available at https://www.incometaxindia.gov.in/Pages/right-to-information.aspx The request has to be:

  • Made in writing or submitted online
  • Written in English, Hindi or official language of the state you are living in
  • Accompanied by fees requested during the application

The Public Information Officer will also help you write down the application if you require assistance. Other than the personal details, you will not have to give any reason for asking the information.

The CPIO has to provide the information within 30 days of the receipt of the request. If he does not do this, he may be punished with a penalty of Rs. 25,000. For details of CPIO, please click here​​ and visit the respective Field Offices/Directorate Generals Pages​​ or call Aaykar Sampark Kendra at 0124-2438000.

If you require any assistance on filing an FIR, then you can check out the Right to Information topic for any further clarification.

Cancelled cheque

If the words “cancelled” has been written on the cheque then, it is known as a cancelled cheque. Usually, the word cancelled is written across the cheque leaf in a big font, so that it is clear to anyone seeing the cheque, that it is a cancelled cheque. The purpose of giving anyone a cancelled cheque is to let someone, for example, your employer, know your bank account details such as:

  • Your full name,
  • IFSC Code,
  • Bank Account Number etc.
Cancelled Cheque

For illustration purposes only

Income exempt from Income Tax

Exemptions are those incomes which are exempt from tax. In other words, they do not form a part of the total income calculated for taxation purposes.

Incomes Exempt from Tax

Given below are some examples of income that are exempted from tax:

  • Agricultural income(( Section 10(1), Income Tax Act, 1961))
  • Any payments received from family income or income of an estate belonging to the family by an individual member of a Hindu Undivided Family(( Section 10(2), Income Tax Act, 1961))
  • Share of profit from a firm(( Section 10(2A), Income Tax Act, 1961))
  • Leave travel concession provided by an employer to his employee who is an Indian citizen
  • Remuneration received by foreign diplomats(( Section 10(6), Income Tax Act, 1961))
  • Death-cum-retirement gratuity(( Section 10(10), Income Tax Act, 1961))
  • Retrenchment compensation(( Section 10(10B), Income Tax Act, 1961))
  • Scholarship granted to meet the cost of education(( Section 10(16), Income Tax Act, 1961))
  • Family pension received by families of Armed Forces(( Section 10(19), Income Tax Act, 1961))
  • Foreign allowance granted by the  Government of India to its employees posted abroad(( Section 10(7), Income Tax Act, 1961))
  • Tax paid on behalf of foreign companies in India(( Section 10(6A), Income Tax Act, 1961))
  • Income of mutual fund set up by a public sector bank or financial institution(( Section 10(23D), Income Tax Act, 1961))
  • Compensation received by victims of Bhopal Gas Tragedy(( Section 10(10BB), Income Tax Act, 1961))
  • Any sum of money from a life insurance policy. This includes bonuses but does not cover Keyman insurance policies(( Section 10(10D), Income Tax Act, 1961))
  • Daily allowance of Member of Parliament or State Legislature(( Section 10(17), Income Tax Act, 1961))
  • Any income from an approved research association(( Section 10(22B), Income Tax Act, 1961))

Further, apart from the ones listed above, there are multiple exemptions under income tax law. To read more click here.

Some institutions are also exempt from giving tax such as India Wildlife Conservation Trust, charitable organizations etc. Read here to see more on exempted institutions.

Precautions to be taken by customers

There are certain precautions to be taken by customers when dealing with cheques.

  • Ensure that the cheque has CTS 2010 written on it.
  • Preferably use image-friendly coloured inks like blue and black while writing cheques. Avoid using inks like green and red.
  • You should also avoid any alterations/corrections once you have written the cheque. Preferably, use a new cheque leaf if you need to make any alterations/corrections as the cheque may be cleared through image based clearing system.
  • Make sure that your signature on the cheque is the same as the signature in the bank records. Otherwise, your cheque may be declined and the bank may penalize you.

Financial Year and Assessment Year

The government levies income tax on the annual income of an individual. Income tax is calculated from a period starting from 1st April and ending on 31st March of a calendar year.

The income tax law classifies the calendar year as:

  • Previous year(( Section 3, Income Tax Act, 1961)): The year in which income is earned is called a previous year.
  • Assessment year: The year in which the income is charged for taxation is called an assessment year.

For example, income earned during the period of 1st April, 2020 to 31st March, 2021 by an individual is income of the previous year 2020-21. The income of the previous year 2020-21 is taxable in the next year, i.e., in the assessment year 2021-22.​

Previous Year for Businesses(( Proviso to Section 3, Income Tax Act, 1961))

However, for businesses or professions, the “previous year” is the period beginning with

  • The date of setting up of the business or profession; or
  • The date on which the source of income newly comes into existence,

and ending with the said financial year.

Precautions to be taken by banks while dealing with cheques

Use CTS Cheques Only

Banks should use “CTS 2010” cheques which are not only image friendly but also have more security features.

Using Stamps on Cheques With Care

Banks should exercise care while affixing stamps on the cheque forms, so that it does not interfere with the material portions such as date, payee’s name, amount and signature. The use of rubber stamps, etc, should not overshadow the clear appearance of these basic features in the image.

Scanning of CTS Cheques by Banks

It is necessary to ensure that all essential elements of a cheque are captured in an image during the scanning process and banks have to exercise appropriate care in this regard.

Procedure to file Revised Return

Electronically filing revised return (offline):

Step 1: Select ITR Form

For offline mode, you have to  download the appropriate ITR Form from the Income Tax Department’s e-filing portal. If you want to know which ITR Form you have to fill, read here.

A pre-filled form can also be downloaded if you log in to the e-filing portal. From your account, you can choose to ‘Download Pre-Filled XML’, which can be imported to your ITR form for prefilling the personal and other available details.

Step 2: Fill in Details

You can fill in the downloaded ITR form offline. Ensure that you fill or correct the relevant details of the form. Under ‘General Information’, choose the ‘Return filing section’ as ‘Revised return under section 139(5)’ and ‘Return filing type’ as ‘Revised’.

Enter the Acknowledgement number and date of filing of the original return. You can find out these details by going to your e-filing account and choosing ‘Income Tax Returns’ under the e-filed returns/forms.

Step 3: Submit the Form

Generate and save the form. After preparing the revised return offline, you can then submit the form online by logging in to your account on the e-filing portal.

Step 4: Upload ITR Form in XML Format

After selecting the ‘e-File’ menu, leading to the ‘Income tax return’ page, you will have to select the assessment year, ITR form number, and state that your ITR is a revised return. You can then upload your form in the XML format. You have several options for verifying your form, and can choose to verify your form at the time of submission or later.

Once the verification is done, you can check your ITR status here.

 

Electronically filing revised return (online):

Step 1: Select ITR Form

For online mode, you have to directly login to the Income Tax Department’s  e-filing portal and select either ITR-1 or ITR-4. If you want to know which ITR Form is applicable to you, read here.

Step 2: Prepare your ITR Form online

After selecting the ‘e-File’ menu, leading to the ‘Income tax return’ page, you will have to select the assessment year, ITR form number, and state that your ITR is a revised return. You can then access your form by selecting the ‘Prepare and submit online’ option.

Step 3: Fill in Details

Ensure that you fill or correct the relevant details of the form. Under ‘General Information’, choose the ‘Return filing section’ as ‘Revised return under section 139(5)’ and ‘Return filing type’ as ‘Revised’.

Enter the Acknowledgement number and date of filing of the original return. You can find out these details by going to your e-filing account and choosing ‘Income Tax Returns’ under the e-filed returns/forms.

Step 4: Submit the form

After filling the form, you have several options for verifying your form, and can choose to verify your form at the time of submission or later.

Once the verification is done, you can check your ITR status here.

Cheque Processing Problems

There are several reasons that could cause problems in cheque processing and lead to cheque bouncing. But not all of them warrant legal action. For example, a cheque could bounce if the sign of the drawer does not match with the account.

A detailed list of these reasons has been provided by the Reserve Bank of India in Annexure D of the Uniform Regulation and Rules for Bankers Clearing Houses.

Mandatory Linking of Aadhar/PAN for filing Returns

It is mandatory for all income tax taxpayers or persons who have to file income returns (even on behalf of others), to have a Permanent Account Number (PAN). Your Permanent Account Number (PAN) is a 10-digit alphanumeric identifier, issued by the Income Tax Department. Each taxpayer (e.g. individual, firm, company, etc.) is issued a unique PAN Number, and it is compulsory to quote your PAN Number on return of income tax.

While making an application for a PAN Number, it is mandatory to quote your Aadhaar/Aadhaar Enrolment ID.  You can get an instant PAN by providing your Aadhaar details. Once you have applied for a PAN, you can also check the status of your PAN application. If there are any changes in your PAN/Aadhaar details, you can update the details.

Read more here about the procedure for obtaining a PAN number.