Heading :A dummy's guide to filing tax returns
Sub Heading : With just seven days left to file tax returns, many are spending sleepless nights trying to figure their way through financial jargon and endless paperwork. Vivek Kaul gives you a low down on all that you need to know to successfully get through the ordeal
Author : Vivek Kaul
Content : What is an assessment year?
An assessment year is the year when the income earned is assessed or taken into account. So the income earned in the financial year 2007-08 is assessed in 2008-09, which is the current assessment year. A financial year starts on April 1 and ends on March 31.
I have not paid any tax for the year; do I still need to file a tax return?
You need to file an income tax return if you have earned an income greater than the basic exemption limit. For the financial year 2007-08, or the assessment year 2008-09, the basic exemption limits for males is Rs 1.1 lakh. For females and senior citizens it is Rs 1.45 lakh and Rs 1.95 lakh respectively. So if you have earned an income greater than your exemption limit, you have to file a return, even if you have not paid any tax, employing the various deductions in place.
Where can I find the Indian Income Tax Return forms?
You can find them on the web address www.incometaxindia.gov.in/download _all.asp
Which form should I fill up?
There are eight Indian Income Tax Return (ITR) forms. If you have income from salary, pension and interest income, then ITR-1 is the form for you. On the web address www.incometaxindia.go
v.in/download_all.asp, where you can find all the ITR forms, there are two versions of ITR-1. You can choose any one of them. Both the forms are the same, only one has larger font size than the other.
If apart from salary and interest income, you have capital gains or earned a rental income or are paying off a home loan, the form to use is ITR-2. Also during the course of the year, if you have received a dividend from a company whose shares you own or from a mutual fund, you need to file ITR-2. This despite the fact that dividend is tax exempt in the hands of the investor.
Other than this if, you have any business income ITR-4 is the form to fill up, notwithstanding any other type of income that you may have earned during the course of the year.
How do I fill up the form?
If you have only salary income, then the details in the Form 16 issued by the organisation you work for is enough to fill up the form. If you have income from other sources then you would need those details to file your returns.
What if my organisation still hasn't issued the Form 16?
Form 16 has to be issued by April 30, within 30 days of the end of the financial year. Nevertheless, that rarely happens. If your organisation still hasn't issued Form16, ask them to do so immediately. Without Form 16, you will not have the necessary details required to file the income tax return. If your organisation is unlikely to issue a Form 16 in time, then write a registered letter to the organisation, a copy of which should be sent to your assessing officer.
I do not have a permanent account number, can I still file my return?
The permanent account number (PAN) is compulsory to file a tax return. If you do not have a PAN card, apply for one as soon as possible. You can initiate the process by downloading and filling up Form No 49A from the web address www.incometaxindia.gov.in/allforms.asp. This form along with the necessary documents can be submitted at any of the offices of UTI Technology Services Limited.
Do I need to attach annexures while filing the tax return?
ITR forms by their very definition are supposed to annexure-less. As instruction number 4 in the ITR form points out, "No document (including TDS certificate) should be attached to this form. The official receiving the return has been instructed to detach all documents enclosed with this form and return the same to the assessee." However, some income tax offices have been insisting on annexures like Form 16 and tax deducted at source (TDS) certificates while filing tax returns. Therefore, it might be a good idea to carry your Form 16 and TDS certificates when you go to file your tax returns for the year.
Can I pay taxes online too?
Account holders of 29 banks can pay taxes online by filing up challans via a platform made available by the National Securities Depository Ltd (NSDL) at https://tin.tin.nsdl.com/etax/Index.html. You would need a net banking account with the listed banks to pay taxes online.
I had more than one job last year. How do I file my return?
You will need to get hold of all your form 16s from your previous employers as well as the current employer. Fill up the relevant ITR form by aggregating the details available in all your form 16s.
I don't need to pay income tax on dividend income and long term capital gain from selling shares or equity mutual funds. Do I need to disclose that?
Details of income that is exempt from tax also needs to be provided while filing up the return.
I have a cash deposit of Rs 15 lakh in my savings account. Do I need to declare?
You have to compulsorily make some disclosures while filing your income tax return. Cash deposits of Rs 10 lakh or more in a savings account. Credit card payments of Rs 2 lakh or more on a credit card. Purchase or sale of an immovable property at Rs 30 lakh or more. Purchase of shares of a company of Rs 1 lakh or more, and purchase of units of mutual funds of Rs 2 lakh or more. (For a complete list See Instruction 9(ii) of ITR-2)
What about the income earned by my child?
Income earned by your child is to be clubbed with the income of the parent with the higher income. If, in the first year in which the child earns an income, the income is clubbed with the income of the father who earns a higher income, it has to be continued to be clubbed to the income of the father, even if next year, his mother might have a higher income.
The income cannot be clubbed with the parent's income if the child earns the money from his own talent. So if your child has just won a reality show singing contest, then a separate return needs to be filed in his name.
I had gifted Rs 1 lakh to my husband at the beginning of the financial year 2007-08, how do I account for that?
Any income arising from gifts given to your spouse are taxed in your hands. Therefore, in this case, if your husband earns Rs 7,000 as interest from your gift of Rs 1 lakh then, this Rs 7,000 will be added to your income for the year and taxed accordingly. However, if your husband decides not to spend this money and reinvests it, then the next year, the interest earned on the Rs 7,000 that has been invested will be added to your husband's income for the year and not yours.
With the stock markets falling, I had to sell my shares for a loss, how do I adjust for the losses?
Capital losses can be adjusted only against capital gains and not against any other source of income.
First and foremost, you need to figure out whether your have made a short-term capital loss or a long-term capital loss. If the loss is a short-term capital loss, that is you sold the shares within one year of buying them at a loss, then you can set it off against any taxable short-term capital gain and any taxable long-term capital gain.
Let us say you make a short-term capital loss of Rs 10,000 on selling shares. This loss can be set off against any short-term capital gain you have made on selling shares or any other taxable short-term capital gain. But this loss cannot be set off against long-term capital gain on selling shares, because long-term capital gain made on selling shares is not taxable. Nevertheless, you can set off the short-term capital loss against any other taxable long-term capital gain like sale of gold or property or debt mutual funds.
What about long-term capital loss on selling shares? Long-term capital gain on selling shares or units of equity mutual funds is tax-free. As a result long-term capital loss on selling shares is also tax-free. What it means is that any long-term capital loss incurred on selling shares or units of equity mutual fund cannot be set off against any long-term capital gain, even taxable long-term capital gain made on selling units of debt mutual funds or for that matter property or gold.
If during a given year, you have made a capital loss and do not have enough capital gains to set it off, then you can carry it forward to the next year. The Income Tax Act allows you carry forward this loss for the next eight years. If after eight years the loss is still not adjusted, it cannot be carried forward anymore.
What if I do not file my return by July 31?
As the website of the income tax department points out, the return "may be furnished at any time before the expiry of two years from the end of the financial year in which the income was earned." So for the income earned during financial year 2007-08, the belated return can be filed before March 31, 2010. However, there is a slight catch here. If you file returns after March 31, 2009, then the income tax department can choose to levy a fine of Rs 5,000. In addition, if you have tax outstanding and you do not pay your tax and file your returns before July 31, 2008, then a simple interest of 1% per month will be charged on the amount that is outstanding. The Rs 5,000 fine can also be levied on individuals who choose to pay the amount outstanding after March 31, 2009. This will be over and above the 1% per month simple interest charged on the amount outstanding.
I have already filed my return, but now I realise I made mistakes while filing it. What do I do now?
You can refile your income tax return before July 31, 2008, provided the income department has not completed the assessment already.
The company I work for deducted excess tax, more than I am liable to pay. How will I get the excess money back?
After the income tax department completes your assessment, the excess money will be either credited to your bank account (if you have opted for refunds to be directly deposited to your bank account while filing your return) or a cheque will be sent across to you by the income tax department.
Where can I go if I have more doubts?
The IT department has a list of answers to FAQs on www.incometaxindia.gov.in/questionbank.htm#D55
k_vivek@dnaindia.net
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