Following are the 10 easy steps for Tax filing.
Step 1:Identify your sources of income under some income heads.
Step 2: Keep documents ready
Step 3: Compute the Gross Total Income (GTI)
Step 4:Calculate deductions
Step 5:GTI minus deductions.
Step 6: Calculate total taxable income
Step 7:Calculate tax payable
Step 8:Find your tax rates
Step 9:Choose the correct income tax return (ITR) form.
Step 10:File returns
Step 1: Identify your sources of income under these income heads.
Categorize your income against the relevant item. The income heads can be of following kind.
· Income from Salary
· Income from Business/Profession
· Income from House Property
· Income from Capital Gains
· Income from Other Sources
You can maintain a table for this purpose. This will help you to categorize your income from different sources.
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S. No.
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Income Head
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Income Amount
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1
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Salary
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2
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Business/Profession
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|
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3
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House Property
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4
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Capital Gains
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5
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Other Sources
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Step 2: Keep documents ready
You should know which documents you need to keep in hand in order to calculate your tax. You should identify the sources of income and place them under the right income heads. Here is a list of documents to be maintained.
Income from Salary
· 4Form 16
· 4Form 12 BA
Income from Business/Profession
· Profit/loss account 4Balance sheet
· TDS (Tax Deducted at Source) certificates
· Advance tax challans
· Bills/vouchers
Income from House Property
· Particulars of tenants, including their PAN
· TDS certificate 4Gross rent received
· Advance tax challans
Income from Capital Gains
· Contract notes
· Advance tax challans
· Sale/purchase documents of moveable/immoveable assets
Income from Other Sources
· All documents related to income
· TDS certificates
· Advance tax paid
Step 3: Compute the gross total income (GTI)
Add up your earnings from the five income heads to arrive at total taxable income. To get your total taxable income, you will have to subtract the standard tax deductions (Section 80) from the gross income.
Income from salary
Gross salary includes basic salary, commissions, allowances and perquisites. Subtract certain deductions from this. The balance is charged under the head 'salary income'. Your basic, allowances, commissions and bonuses are fully taxable.
Step 4: Calculating deductions
Add up all your Section 80C and non-80C deductions and minus it from your gross total income.
House rent allowance (HRA): This is exempted up to a certain limit if you are actually paying house rent. The lowest of three amounts, actual HRA received, rent paid in excess of 10 per cent of basic salary and 40 per cent of your basic salary (50 per cent for Mumbai, Kolkata, Delhi and Chennai), would be exempted. Conveyance allowance up to Rs 800 per month is exempt from tax.
Leave travel allowance (LTA): It is a reimbursement for travel expenses that you and your family members incur within India while you are on leave. While LTA can be paid to you every year, it is treated as tax-free only for two journeys in a block of four years. Both these journeys can be made in any one of the four years or spread out over the four years.
Step 5: GTI minus deductions.
Medical allowance: Reimbursement of medical expenditure incurred by you and your family is tax-free up to Rs 15,000 per annum. All reimbursements need to be supported by bills.
Perquisites: These are benefits that you get in addition to your regular salary. These are usually in the form of accommodation, car and concessional loans. The total of all perquisite values is added to the salary and tax is calculated on the usual slabs.
Premium for group medical and term insurance paid by your employer escapes the tax net. However, you need not worry about calculating all this. Your employer will give you Form 12BA, which will show the value of your perks as part of your salary.
Step 6: Calculating total taxable income
Income from House Property
Rental income from a residential or commercial property that you own is taxable. If you have more than one house property and one is self-occupied, then even if the other properties are not rented out, they will be treated so and the implied rent, based on annual value of the property, will be taxed.
The gross annual value is the highest of the municipal value, the actual rent, or the fair rental value. Preferential treatment is given to one self-occupied house, whose annual value is taken as 'Nil'. The interest payable on home loans is tax-deductible up to Rs 1.5 lakh a year.
Income from capital gains
Short-term capital gains are included in your gross total income and taxed according to the slab in which your income falls. Except listed securities, long-term gains made from all other asset categories are taxed at 20 per cent with indexation. Gains from shares or equity MFs are tax-free in the long term. These gains are taxed at 15 per cent in the short term, provided, of course, that the securities transaction tax has been paid.
Step 7: Calculating tax payable
Your total tax liability may stand reduced if some tax has been deducted at source (TDS). Subtract TDS from your total tax liability to get the final amount to be paid as tax.
Income from business/profession
In case you have income from a business or you are in a profession, the excess of gross receipts over expenses incurred to earn it will be taxed under this head. A person earning his living in a profession such as law, medicine, engineering, architecture or technical consultancy, whose total gross receipts from that profession exceed Rs 1.5 lakh per annum, is required to maintain books of accounts.
Income from others sources
Usually, any income that does not fall under the four heads of income mentioned above is taxed under this head. Examples of such income are, interest earned on bank fixed deposits, savings account and National Savings Certificates. Now that you have the numbers right, you can proceed to the final act of actually filing your taxes.
Step 8: Finding your tax rates
Individual taxpayers are categorized as women, senior citizens and others. Identify your category and check out your tax liability according to the tax slab applicable for assessment year 2009-10 or financial year 2008-09
Tax rates for ALL (except senior citizens and women)
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Income
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Tax
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Up to Rs. 1.50 lakh
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Nil
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Rs. 1.50-3.00 lakh
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10% of total income exceeding Rs. 1.50 lakh
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Rs. 3.00-5.00 lakh
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Rs. 15,000 +20 of total income exceeding Rs 3 lakh
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Rs. 5.00-10.00 lakh
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Rs 55,000 +30% of total income exceeding Rs 5 lakh
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Above Rs. 10.00 lakh
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Rs 2,05,000 +30% of total income exceeding Rs 10 lakh
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Tax rates for Senior Citizens
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Income
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Tax
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Up to Rs. 2.25 lakh
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Nil
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Rs. 2.25-3.00 lakh
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10% of total income exceeding Rs 2.25 lakh
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Rs. 3.00-5.00 lakh
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Rs 7,500 +20% of total income exceeding Rs 3 lakh
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Rs. 5.00-10.00 lakh
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Rs 47,500 +30% of total income exceeding Rs 5 lakh
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Above Rs. 10.00 lakh
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Rs 1,97,500 +30% of total income exceeding Rs 10 lakh
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Tax Rates for Women
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Income
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Tax
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Upto Rs. 1.80
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Nil
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Rs. 1.80-3.00
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10% of total income exceeding Rs 1.80 lakh
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Rs. 3.00-5.00
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Rs 12,000 +20% of total income exceeding Rs 3 lakh
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Rs. 5.00-10.00
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Rs 52,000 +30% of total income exceeding Rs 5 lakh
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Above Rs. 10.00
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Rs 2,02,000 +30% of total income exceeding Rs 10 lakh
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Taxable income level
· 10% surcharge on income above Rs 10 lakh, 3% cess on tax payable
Step 9: Choosing the correct income tax return (ITR) form.
Based on your income sources, you need to choose your ITR form.
The Final Act
Once the documents and the calculations are done, the process of filing tax enters the final phase.
Which form to fill?
The return form that you would need to fill will depend on your income sources:
· ITR-1: For individuals having income from salary, pension and interest earned in the financial year
· ITR-2: In addition to the above income sources, income from capital gains, income/loss from house property and income from any other source
· ITR-4: For all individuals having income from a business or profession
How to file your returns?
You can file your returns offline or online. However, before doing so, check whether you still have a tax liability. In you are still to pay taxes, do so through Internet banking or through cash/cheque at any bank along with Form 280. In both cases, you will get a receipt number which will have to be quoted in your income tax return (ITR) form
Offline
· Fill ITR yourself or take a CA's help
· Submit it at the IT office
· Get an acknowledgement
· Online
· Register online
· Input details of Form 16 in ITR
· To submit ITR physically, take its printout to the IT office and get an acknowledgement
If you want to send tax details to the IT department online and don't have digital signature (DS):
· Save XML file, upload it on IT department site
· Download ITR-V (acknowledgement)
· Courier ITR-V at IT office (if you have DS, there's no need to do so)
Now that you have sorted out the documents needed to file your tax returns and worked out the mathematics, you just have to transfer the necessary information to the income tax department in the prescribed format by filling out a tax return form and depositing it. Once that is done, your task is over -- for this year. Here's what to do:
Which form should you use?
There are two income tax return forms, ITR-1 and ITR-2, for salaried individuals. Your sources of income (they will fall under one or more of the five income sources mentioned in the earlier articles) will decide which form you need to use.
Use ITR-1 to file your tax return if your income is from salary, pension or interest. In case of any capital gains, income or loss from house property and income from any other source, you will have to file ITR-2. You can go to www.incometaxindia.gov.in/download_all.asp to download any of these forms.
You will find ITR-1 fairly simple to fill. A prerequisite for the exercise is Form 16, the certificate that comes from the employer. It shows the tax deducted at source (TDS) from the income chargeable under the head salary.
ITR-1 is almost a replica of Form 16. You just have to pick the numbers from Form 16 and put in the ITR form.
That's the end of your job. After this, all you have to do is deposit this form. You will need to fill up ITR-2 if you, as a salaried individual, have made any capital gains. That would require putting in the Form 16 figures in ITR-2 in the same way as you did in case of ITR-1.
In addition, you will have to fill in the capital gains or income, if any, from house property and securities.
If your income is from business or profession, which means that you are not a salaried person, you will need to use ITR-4. This form is slightly more complicated than the other two and you will possibly need the help of someone trained in preparing a tax return, preferably a chartered accountant (CA).
Step 10: Filing returns
You can file your returns offline or online.
Remaining Tax Liability
Subtract your TDS from the tax liability that you computed earlier to ascertain if you are still to pay any taxes. If you still have a tax liability, get hold of Form 280, fill it up and deposit it in any bank along with the tax payable in cash or cheque before filing your returns.
You can also pay this through Internet banking. In both cases, you will get a receipt number, which has to be quoted in the ITR form.
What to do for refunds?
If you are entitled to a tax refund, in addition to your contact details, enter your bank details in the form. It is equally important to mention the MICR number of your bank branch. MICR is a 9-digit number mentioned next to the cheque number in the cheque leaflet. If you file your return on time, you will get interest on the refund amount from the beginning of the assessment year.
How to file?
The actual filing of return can be done either by using the traditional paper form or electronically over the Internet.
Offline:
Under the offline method, you will have two options -- you may either submit the ITR form at the nearest income tax office (ITO) after filling it up yourself, or you may get a CA or a tax return preparer (TRP) to do it for you.
You may also take help from the public relations officer of the ITO to fill the form. No documents or investment proofs need to be attached with the form, but remember to bring photocopies or originals with you to the ITO.
These will come in handy if you are asked to authenticate your numbers. The CA would charge a fee in accordance with your income slab and the number of income sources. Typically, it would range from Rs 300 to Rs 2,000.
Online:
Known as efiling, this method is fast catching up. Filing returns online is compulsory for companies, but optional for salaried individuals. In the future it will become compulsory for individuals with a certain level of income, so it may not be a bad idea to familiarize yourself with the process.
E-filing process
In order to e-file your returns, you will have to input the details of Form 16 in the software of the website, which would automatically generate an electronic return in XML format. This format helps in sharing of structured data across different information systems. A PDF file of the relevant ITR form is also created along with the XML format on the desktop of your computer. You can download this ITR form, submit it at the ITO and get an acknowledgement.
Alternatively, save the XML file on your desktop and then upload it on www.incometaxindiaefiling.gov.in, the government site. Private sites upload it on the government site on your behalf. You will get the acknowledgement by email.
Using Digital Signature (DS)
Using a DS will help you complete the e-filing process without paperwork and visits to the ITO. In case DS is used, the acknowledgement is emailed to the taxpayer.
How to get a DS?
A DS can be acquired from any of the agencies authorised by the government for the job, including the private and government websites meant for filing tax returns. To get your DS from a tax site, download the relevant form, fill it up, attach the required documents, such as your identity and address proofs, and courier them to the address concerned. The entire process of acquiring a DS may take around 15 days.
E-filing without DS
E-filing without DS is equally convenient now. After filing the returns online, the taxpayer receives an acknowledgment called the ITR-V. Till last year, ITR-V had to be submitted at the nearest ITO, making e-filing a manual affair at the end. From this year, this form just needs to be couriered to a specific IT office in Bangalore making the process convenient for assessees.
E-filing sites
There is a government site that offers this facility free of cost. The site is; www.incometaxindiaefiling.gov.in/portal/index.jsp.
There are three non-government sites they are secure and easy to navigate. They are;
For any further queries feel free to contact ca.uditagrawal @ gmail.com
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