File your tax returns

Via ET

Come June and it’s time yet again to face the taxman. In fact, for millions of income tax assessees, this time every year begins an exercise to collect and compile whereabouts of their income. This year too the same drill has to be followed, but with a change. SundayET gives a lowdown on what you must know before you file your returns this year.

Get the right form

From assessment year 2007-08, the income tax department has introduced eight new forms, four of which are for individuals and Hindu Undivided Families. First, one should visit the portal, www.incometaxindia.gov.in to confirm which form one needs to fill up. “For instance, with Form 2D or ‘Saral’, available till last year, being withdrawn, salaried individuals having no other income will be required to submit details in the new form ITR1.

Similarly, for those having rental income, they will need to fill up ITR 2,” clarifies Vikas Vasal, director, KPMG India, a leading tax advisory firm worldwide. The latest forms can be downloaded from income tax department website mentioned above.

Count your income sources

An individual may get income from different sources such as salary, house property, profits and gains of business or profession, capital gains, and income from other sources (include earnings not falling under any of previous heads, that is, interest on securities, lottery winning and others). When you compute your total income, it is a mandatory requirement to calculate income from each of these sources separately since the tax treatment is accordingly.

Exemptions available

Exemptions are available under different heads of income and as well on total income. This is an important aspect of filing returns since it helps an individual reduce his net income and maximise savings. A deduction from gross total income is granted if investment is made in specified areas.

The investments eligible are — LIC premiums, contribution to Public Provident Fund scheme, Employee Provident Fund, certain pension funds, medical insurance premium, interest on loan taken for higher education and others. Deduction up to Rs 1,00,000 from gross income is available.

Clubbing of income

You should not forget to add income of a close relative like spouse or minor child, if any, while filing returns. This is an important rule of clubbing the income. It is a wrong perception that one can reduce tax liability by showing business income or expenses in name of a close relative. The only exception to this rule is if a close relative possesses technical or professional qualifications and the income is solely due to application of his/ her technical knowledge and experience.

Current tax slab rates

The slab rate you fall into depends on the particular case. For example, income up to Rs 1.35 lakh for women is exempt from tax, while in case of elderly above 65 years of age, earnings up to Rs 1.85 lakh is tax-free. For individuals not falling in these categories, no tax has to be paid on an income of up to Rs 1 lakh while 10% is paid on income ranging between Rs 1 lakh and Rs 1.5 lakh, 20% on Rs 1.5 lakh to Rs 2.5 lakh and 30% on Rs 2.5 lakh and above. Further, a 2% education cess will be applicable to all.

Calculation of TDS

Throughout the year, an individual pays advance tax or tax deducted at source. One must gather all the transactions where an individual paid advance tax before filing returns.

Annexure attachment

From this assessment year, an individual isn’t required to attach any document (including TDS certificate, i.e., Form 16 and 16A) with the form, regardless of whether a refund is claimed. “Now you need to write down the relevant details in the tax form itself,” explains Vinod Gupta, a renowned chartered accountant.

Scrutinise form

Go through the documents and details thoroughly to see that nothing is missing. For example, the PAN number should be quoted carefully. One must make sure that one is writing the same name that appears on one’s PAN card.

“Further, one must be very careful disclosing the transactions reported in the Annual Information Return (AIR) since the IT department will match banks, registrars, RBI, Mutual funds records with your return forms to find those who don’t declare such investments,” says Vasal.

Acknowledgement receipt

The new form is not required to be submitted in duplicate. After competing the form, acknowledgement slip attached with this form should be duly filled. The duplicate returned by the I-T department, duly acknowledged, serves as proof of the details of income submitted by assessee.

Don’t forget the due date

Individuals having only salary income and non-corporate assessees who don’t need to get their accounts audited need to file their returns before the due date that is July 31. Or else obligatory interest at 1.25% per month of tax due is payable beyond the due date.