Volume 3, Issue 13

17th July, 2010

Tax Alert
Companies To File E-Returns Compulsorily With Digital Signature

Now that the financial year 2009-10 has ended, the audit of books of account would be in progress. Once the audit is concluded, work would start on preparation and filing of return of income.

For FY 2008-09, the income-tax return of companies was compulsorily required to be filed
electronically. Company assessees had the following courses of action available to them:

  • File the return electronically with digital signature, or
  • File the return electronically without digital signature and thereafter physically send a
    signed acknowledgement of the return of income to the Central Processing Centre of the Incometax Department at Bangalore.

Also, Individuals and HUFs who were required to get their accounts audited under the Income-tax Act, 1961 (Tax Audit) could file their income-tax returns in physical form or electronically. There was no compulsion either way.

The Finance Minister in his Budgetspeech for the year 2010 had emphasized onincreased
computerisation of tax compliances and reducing the physical interface between tax payers and tax administration.

In line with this intention, the Central Board of Direct Taxes has recently issued Notification No. 49/2010 which requires all company assessees to mandatorily file their income-tax returns electronically with digital signature. The option of filing the return of income without digital signature and thereafter sending the signed copy of the acknowledgement to the Central Processing Centre of the Income-tax Department at Bangalore is no longer available for company assessees.

In respect of Individuals and HUFs who are liable to tax audit, the return of income is now compulsorily required to be filed electronically, with or without Digital Signature.

All these changes are effective from AY 2010-11 i.e. they will apply to the returns that are to be filed for the financial year ended 31st March, 2010 onwards.

Care to be taken by Companies:

Companies need to ensure that the digital signature of the person who would sign the return of income is readily available. Where the signatory to the return of income already has a digital signature, it should be ensured that the same is in operation. The date of expiry of the digital signature should be verified and necessary renewals should be made in time.

Where the Soft token of the digital signature is not available (‘.PFX’ file), it is advisable to obtain the same since it may not always be possible to send the Hard token (USB token) to the place from which the return of income is to be uploaded.

SKP’s comments:

This change in the manner in which the Incometax returns are filed is one more step taken by the Government towards paperless tax compliances. Even though other tax compliances like quarterly TDS statements can still be made without Digital Signature, it is likely that the Government, in due course, may require all tax compliances to be made with digital signature.