E-filing tax returns? Take the safe and easy way out

10 must-do things while filing your income tax return

Sanjeev Sinha, ECONOMICTIMES.COM

With the due date of July 31 fast approaching, it is that time of the year again when the nation’s tax payers scramble to file I-T returns. After all, filing of tax return is compulsory for everyone whose gross total income exceeds the basic exemption limit.

For financial year 2007-08, for instance, the basic exemption limit was Rs 1.45 lakh for women below 65 years of age, Rs 1.95 lakh for senior citizens and Rs 1.10 lakh for any other individual. However, for financial year 2008-09, the limit has been increased to Rs 1.80 lakh for women below 65 years of age, Rs 2.25 for senior citizens and Rs 1.50 lakh for males below 65 years.

Thus, if your income for the year exceeded the exemption limit, you will be required to file the return by the due date. “You need to file the tax return even if you are not paying any tax or even if your employer has deducted tax at source,” says Ashish Kapur, CEO, Invest Shoppe India Ltd.

However, despite all the precautions taken by you, rush-hour filing may mean that you could inadvertently miss out on certain details and disclosures, and therefore be on the bad books of the taxman. If not that, you might just forget to make the most of the tax breaks available to you, thus paying more tax in the process and claiming no or less return. Following are 10 important things to do before filing your I-T return.

1) Identify Sources of Income

Firstly, you need to identify your sources of income under different heads. Under the I-T Act, all incomes earned by persons are classified into five different heads, such as income from salary, income from house property, income from business or profession, income from capital gains, and income from other sources. Thus, you should identify all your incomes from different sources, just to ensure that you haven’t missed out something while filing your return.

2) Refer to the Basic Documents

According to Vikas Vasal, executive director, KPMG, some basic documents/information that should be referred to while filling the return include: Form No 16 (issued by the employer): This shows the income from salary and tax deducted by the employer on the same. Summary of all bank accounts during the year: This summary gives an idea about the income earned during the year, investments made and other expenses. This will ensure that neither any income nor any eligible deductions are left out in the return. Details of tax paid during the year: This is required in case the individual has paid any advance tax during the year. Income of a minor child: This is to be included (except in few cases) even if it is a small amount, e.g. bank interest. Generate your Tax Return for free with the ET Tax Wizard

3) Compute Your Tax Liability

Having identified your sources of income and after referring to the basic documents, you need to compute your tax liability for the year. If you are familiar with the process and are comfortable with doing it, you can do it all by yourself. If not, you should take the help of a tax expert or a CA or some other qualified professional. This is important as a wrong computation of your tax liability can land you in trouble later on. You also need to ensure that “if any tax is payable, the same has been paid as ‘self assessment tax’ before filing the tax return. Further, if any interest is payable for late payment of tax, then the same has also been deposited,” says Vasal. 4) Chose the Right Form Once the details in respect of income and expenses are collated, you should check which tax return form is applicable to you. With the introduction of new forms, based on the nature of income earned during the year, you should select the right income-tax form. For example, there are two I-T return forms - ITR-1 and ITR-2 – available for salaried individuals at the moment, and your sources of income will decide which form to use. Use the first form if your income is from salary, pension or interest earned in the financial year, and use the second one in case of any capital gain, income or loss from house property and income from any other source. There is another form – ITR-4 – which is meant for individuals having income from a business or profession. The Tax Department will refuse to accept your form in case you have chosen the wrong one. 5) Fill in Correct Personal Details Ensure that you fill in correct personal details in the form meant for you, especially your name, address, bank account details and PAN number. Bank account details include the bank account number, type of account and the bank’s MICR code. “This is crucial, especially if you are claiming a refund. Likewise, your PAN is very important because the tax laws levy a fine for not quoting or misquoting your PAN number,” says Kapur. 6) Claim all Deductions Ensure that you have, under various sections of the I-T Act, claimed all the deductions that you are eligible for. For example, a. Under Sec 80 C – For investments made like PF, PPF, NSC, school tuition fees of children, insurance premium, investments in specified mutual funds etc. b. Under Sec 80 G - Donations made to charitable organisations c. Housing deduction for interest on housing loan etc. 7) Information of Specified Investments/ Exempt Income  According to Vikas Vasal, executive director, KPMG, some basic documents/information that should be referred to while filling the return include: Form No 16 (issued by the employer): This shows the income from salary and tax deducted by the employer on the same. Summary of all bank accounts during the year: This summary gives an idea about the income earned during the year, investments made and other expenses. This will ensure that neither any income nor any eligible deductions are left out in the return. Details of tax paid during the year: This is required in case the individual has paid any advance tax during the year. Income of a minor child: This is to be included (except in few cases) even if it is a small amount, e.g. bank interest. 8) Claiming a Loss If you are planning to claim a loss in the income-tax return, which you would like to carry forward, the same can be done, only if the return is filed by the due date. If this filing deadline is not met, then the loss claimed would not be allowed to be carried forward for future set off against income. 9) File By Due Date & In the Right Tax Jurisdiction After the tax return is filled in, the next step is to file it appropriately, by the due date. For individuals having salary and interest income only, the due date of filing the tax return for the financial year 2008-09 is July 31, 2009. The return may be filed either electronically or in printed form. In few cases, even the electronically-filed return has to be filed in printed form within a given time period. “One must also ensure that the return is filed with the right tax officer (tax jurisdiction). This is determined based on the address of the individual. In case of salaried employees, the jurisdiction is determined by particulars of the employer,” informs Vasal. The proof of filing the return is the acknowledgement, which is stamped and signed by the tax officer and a copy is returned to the individual. One important thing to remember is whether it is electronic filing or paper filing, now individuals do not have to attach any document or attachment with the return of income. 10) Maintain Documents For Future Reference The documents based on which the return is prepared may be requested at a later stage by the Income Tax Officer to check the correctness of the claims made. Failure to submit details may lead to disallowance of the deduction claimed, resulting in an increase in the tax liability or a decrease in refund. “Hence, it is advisable that all the documents required to substantiate the return are maintained by the tax payer for future reference,” says Vasal. These are the few important points which you should bear in mind while filing your return. The golden rule is to be organised in your paper work and be timely in paying tax and filing the tax return.

Impact of not filing tax returns

Why is it important to file tax returns?

There is a perception among several individuals that having paid taxes via TDS, filing of returns is not important, because after all, the government's main objective is to ensure that its tax kitty is getting the revenue due to it.

This is a misconception and it is essential to know that it is our constitutional obligation to file tax returns when you are required to do so. So your job does not end at paying taxes, filing returns is equally important. This brings you to the question -

When does it become essential to file returns?

It is essential to file returns when your income crosses/exceeds the basic exemption limit even if it means that on account of you investment planning, your tax obligation may be nil. So for FY 2009-10, filing of tax returns is essential if

> Individuals have taxable income exceeding Rs.160,000 p.a.

> Women have taxable income exceeding Rs.190,000 p.a.

> Senior Citizens have taxable income exceeding Rs.240,000 p.a.

Tax Evasion

Income tax authorities allow you to self assess your income and accordingly pay taxes. Many people tend to believe that his/her income tax return is a drop in the ocean for the income tax authorities and hence not declaring income or understating income may well be worth because it saves you a few bucks.

Deliberately hiding your income from the income tax authorities, to reduce your tax liability, amounts to tax evasion. Some examples of tax evasion include, not declaring interest received on bank fixed deposits or accepting income in cash and not route it through the official system.

Methodology

In order to pick up cases of likely tax evasion, the tax department uses a computer-aided scrutiny system (CASS) that picks up cases by inputting various criteria.

You may just be the unlucky one and you can come under scrutiny which is inviting trouble for yourself as you will be required to furnish all details that he asks for which could include, bank account statements, list of all assets owned by you and your family, details of all family members who reside with the you, and then the tax officer will do a match analysis of income and expenditure to figure out the amount of tax evasion.

The income tax officer can serve the scrutiny notice within one year from the end of the month in which you have filed your return. So, if you had filed your return of income for the FY ended March 31, 2008, on July 24, 2008, you may get a notice any time on or before July 31, 2009.

The notice will be in a fixed format with your name, address PAN and the year in which it is issued and time and date when the tax payer should appear before the income tax officer. The tax payer need not appear personally before the income tax officer. He can authorize a representative to plead his case.

Impact of tax evasion

Individual found to be concealing income will be charged a penalty and that amount can be anywhere up to 3 times the amount of tax evaded. So if your tax evasion amount is Rs. 50,000, if your account is under scrutiny, you may have to pay a penalty of anywhere between Rs. 50,000 and Rs. 150,000 on a case to case basis.

Coming under the tax man's scanner is certainly not a pleasant experience as it can be emotionally and mentally draining. Hence it makes sense to comply with the income tax regulations and file your returns correctly. In trying to save yourself a few bucks, you don't want to be in a situation where you have the tax men chasing you resulting in sleepless nights.

Filing returns has advantages and hence it may make sense to file returns even if you're not needed to because it is an important document that has a lot of weightage

Documents to be kept handy for filing returns:

In order to calculate your tax liability and file accurate returns, it is essential that you keep all the documents from which data is required handy. The documents required include

> Form 16: This document contains information on your salary and tax deducted by your employer. You need to obtain it from your employer

> Form 16 A: This you need to obtain from the parties who have deducted tax while making payments to you during the year. This includes banks/ companies with whom you have a fixed deposit, parties to whom you have given loan among others.

> Copy of bank statements: This will give an idea of all the income earned and expenditure incurred. This will ensure that you have not missed out on any details which should be part of your income tax return.

Documents to be kept handy for filing returns:

> Proof for all the deductions claimed in the return filed i.e. PPF, NSC, Mutual funds, insurance among others.

> Documents concerning investment in property: If you have bought any property during the year, you will need details. In case the property has been purchased on loan, all the loan documents along with a copy of the certificate of the payments made is needed.

> Documents on purchase and sale of investments/assets: Keep a track of all your investments in shares, debentures or any other instrument. Record the purchase date and sale date so that you can assess the profit/loss for the purpose of filing returns.

> The tax payer is not required to submit any documents at the time of filing returns. However, it is essential that all the above mentioned documents/information should be preserved at least for a couple of years as they may be useful to substantiate the return filed if it is picked up for scrutiny.

Time to file IT returns

Ashish Gupta, ET Bureau

It is time to file your income tax returns. Filing of tax returns is compulsory for everyone whose gross total income exceeds the basic exemption limit, which is Rs 1.90 lakhs for women below 65 years of age, Rs 2.40 lakhs for senior citizens and Rs 1.60 lakhs for any other individual, for the financial year 2009-10 (for income earned between April 2009 and March 2010).

The due date for filing the tax returns for financial year 2009-10 in case of individual tax payers is July 31, 2010. The current tax returns don't require any documents to be annexed.

Form 16

This is a certificate issued by the employer and helps the individual arrive at his salary income for the year and tax deducted by the employer.

Form 16A

This is a certificate issued by banks, companies and other parties providing a summary of interest, rent, commission, professional fees etc, paid to an individual during the year.

Property details

These include copies of lease deed, details of rent received and receipts of municipal tax paid during year.

In case of a home loan, a certificate from the lending bank specifying the principal and interest payment made during the year.

Other documents

Contract notes for shares purchased or sold, receipts for donations made, receipts for education fees paid, details of savings such as PPF, PF, insurance, mutual funds etc.

Annual information returns

In addition, one also needs to fill in details related to the annual information returns.

These include:

Cash deposits aggregating to Rs 10 lakhs or more in a year
Credit card payments aggregating to Rs 2 lakhs or more
Payment of Rs 2 lakhs or more for purchase of units of mutual funds
Purchase or sale of any property valued at Rs 30 lakhs or more
Payment of Rs 5 lakhs or more to acquire bonds or debentures issued by a domestic company
Payment of Rs 1 lakh or more to acquire shares issued by a domestic company through a public or rights issue
Purchase of Reserve Bank of India bonds for Rs 5 lakhs or more.

Heads of income

Income has to be computed under these heads:

Income from salary Income or loss from house property Capital gains or loss from sale of capital assets Income or loss from business or profession Income from other sources. Loss, if any, incurred during the year can be set off against income earned during the year subject to specified provisions. Also, some losses incurred in the previous year can also be set off against the income of the current year.

The total income is to be computed under the mentioned heads and tax computed at the prevailing rates. One then needs to adjust the tax deducted and advance tax, if any, paid during the year. The balance tax liability has to be deposited as 'self assessment tax' along with interest.

Individuals can file returns in these forms, depending on the applicability:

ITR I:
For individuals with income from salary and interest only
ITR II:
For individuals with income from salary, house, capital gains and other sources
ITR III:
For individuals with income as partner of a partnership firm
ITR IV:
For individuals with income from business or profession

E-filing returns

The returns can either be filed physically with the tax officer or electronically by logging on to the site www.incometaxindiaefiling .gov.in. In case of electronic filing, an electronic acknowledgment is generated once the tax returns is filed.

This acknowledgement is required to be printed and a signed copy needs to be sent to the Central Processing Unit in Bangalore.

Time to file your income tax returns is coming close

By Ashish Gupta, ET Bureau

The time to file your income tax returns is coming close. Under the Income Tax Act, every individual whose total income before allowing deductions under Chapter VIA of the Income Tax Act exceeds the maximum amount that is not chargeable to income tax is required to furnish his returns of income.

For the current assessment year, 2010-11, (applicable to the previous year 2009-10), the income limits are Rs 1.6 lakhs for men, Rs 1.9 lakhs for women and Rs 2.4 lakhs for senior citizens.

For individuals, the income tax returns need to be filed by July 31, 2010.

Declare income claimed as exempt

A taxpayer is also required to declare income he has claimed as exempt from tax such as dividends, long-term capital gains on which securities transaction tax has been paid etc in the returns form. The government has simplified the IT returns forms for taxpayers to help in easy filing of the tax returns.

Any individual having an income through salary or pension, income from one house (excluding cases where loss is brought forward from previous years) and income from other sources (excluding winnings from lottery and such one-off income) can file his tax returns in the simplified form - Saral II.

In case income of any other person such as spouse or minor child is to be clubbed with the income of the taxpayer the same returns form can be used, provided the incomes so clubbed are in the mentioned categories.

Tax forms

Most individuals with a salary income and one house will primarily be required to file their tax returns in the new Saral-II form (ITR-1). Individuals with a salary income and owning more than one house have to file their returns in Form ITR-2.

The ITR-2 is to be used by an individual or Hindu Undivided Family (HUF) with income under the head salaries/pensions, house property, capital gains, and income from other sources.

ITR-3 is to be used by an individual or HUF who is a partner in a firm. ITR-4 is to be used by an individual or HUF who is carrying on a proprietary business or profession. ITR-5 is to be used by a firm, association of person, body of individuals, corporation or society and local authority.

ITR-6 is to be used by a company. It is to be noted that no documents like tax computations, TDS certificates issued by the employer (Form 16), Other TDS certificates (Form 16A), tax payment challans etc are required to be attached with these returns forms. A taxpayer may file his tax returns in Saral II with the tax authorities in paper form, or electronically with digital signature, transmitting the data in the returns electronically and then submitting the verification returns in Form ITR-5.

Details of certain financial transactions

In addition to the income and taxes, a taxpayer is also required to furnish details of certain financial transactions undertaken by him during the financial year.

These include:

Cash deposits of Rs 10 lakhs or more in a savings bank account

Credit card payment of Rs 2 lakhs or more

Mutual fund units purchased for Rs 2 lakhs or more

Bonds or debentures of a company or institution purchased for Rs 5 lakhs or more

Purchase of shares issued by a company for Rs 1 lakh or more

Property purchased or sold for Rs 30 lakhs or more

Purchase of bonds issued by the Reserve Bank of India (RBI) for Rs 5 lakhs or more.

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