POSTED BY March 14, 2010 COMMENTS (59)ON
With the tax-planning season about to end, most individuals are rushing around to make investments to minimise their tax liability.
And although, the last date for filing income tax returns is just a few months away (July 31), some of us are still unaware about the procedure and guidelines. Have a look at recent changes in the Income tax slab and how it affects the common man.
A. Just having a PAN number does not mean that you have to compulsorily file your tax return. As per the Income Tax Act (1961), you are required to file a “Return of Income”, if your taxable income exceeds Rs 1.60 lakh for the financial year 2009-10 (Rs1.90 lakh in case of women and Rs2.40 lakh in case of senior citizens).
However, you need to have a PAN in order to file income tax returns. Read more
A. Filing ITR is really beneficial for an individual. Apart from the legal obligation, it is mostly required for purposes like:
A. Section 80C is the most important provision under the Income Tax Act (1961). Making use of the available tax deductions can go a long way in helping individuals accumulate wealth.
Benefits of tax planning (for FY 2008-09)
|Income (Rs)||Tax Rate (%)||Maximum tax savings|
after 80C deductions (Rs)
@ 8% pa for 20 years (Rs)
@ 15% pa for 20 years (Rs)Upto Rs 1.50 lakh
Nil ———Rs 1.50 lakh to Rs 3 lakh101030048008168575Rs 3 lakh to Rs 5 lakh202060096016337151Rs 5 lakh and above 3030900144024505726
The amount saved in turns can be invested in various, in order to gain maximum benefits. Prime examples:
Case in point: Consider an individual, in the highest tax bracket, with a gross total income of Rs 6 lakh. If he chooses to ignore the tax sops available under Section 80 C, his tax liability will amount to Rs 87,550 (for AY 2009-10).
Conversely, if he chooses to make eligible investments/contributions of Rs 1, 00,000 under Section 80 C, his tax liability will be Rs56,650 i.e. a saving of Rs 30,900.
Every tax saving investment scheme has inherent advantages and disadvantages; & each individual has to decide his investment strategy based on:
Some tips to plan your finances better:
Watch this video to learn everything about Income tax return:
A. Although tax has been deducted and there is no further liability to pay tax, an employee has to compulsorily file his/her income tax return if he/she exceeds the maximum amount, not chargeable to tax.
It is, in essence, a declaration to the income tax department that you have derived only income from salary and not any other source (if you do have income from other sources, then the same needs to be incorporated).
Note. Many a times, employees do not include the interest that they receive on their savings bank account. The entire interest earned on the savings bank account is taxable.
1. Form No. 16: This is issued by the employer, stating your income from salary, and tax deducted by your employer from salary income.
2. Form No. 16A: This is received from all the payers, who have deducted tax, while making payment to you, during the year. For e.g. banks and companies.
Summary of all bank accounts operated during the year: This summary will give an idea about all the interest income earned during the year.
Details of property owned during the year: If you have bought some property during the year and put it on rent, then you will need details of rent received and receipts of municipal tax paid during the year.
In addition to this, if you have bought such property through a loan, do carry the loan details and a copy of certificate of interest paid during the year.
Sale & purchase bill/documents/contract note in respect of shares transactions during the year: You will also need purchase documents corresponding to the sales made during the year. In case of a large number of transactions, it is advisable that you prepare a statement of sale and corresponding purchase of these investments and arrive at the amount of profit or loss, before actually calculating your taxable income.
Details of tax payments made during the year: This is required only if you have made advance tax or self assessment payment during the year.
FOR INDIVIDUALS: Form No. Applicability
ITR 1 Meant for Individuals, who have
a) Income from salary
b) Interest income
c) Family pension
You can file your returns either Manually or Electronically.
Electronically: The Income Tax Department has introduced a convenient way to file these returns online. The process of electronically filing your Income tax returns, through the Internet, is known as e-filing of returns. This is a really convenient facility, since it saves you the hassle of traveling all the way to the IT office.
This facility is available round the clock and returns could be filed from any place in the world. It also eliminates reduces ‘friction’ between the assessee and tax officials.
Manually: For manual/physical filing, the individual takes a print out of the respective ITR form , from the income tax site, along with the acknowledgment form, and after duly filling it, files it with the respective income tax office. Forms are available free of cost too
A. Under the new procedure, be it is electronic or physical filing, individuals do not have to attach any documents or enclosures with the return of income. However, one should preserve the supporting documents as they can be called for, at a later stage by an income tax officer to check the accuracy of the claims made.
Some of the documents are:
In case of a refund, the bank account details needs to be filled in accurately. In case the refund is opted to be received via ECS direct into the bank account, adequate care should be taken to correctly fill in the MICR code.
Filing returns at the eleventh hour often lead to a lot of inconvenience. Also Filing online, very close to the last day, is risky, as the peak load on the servers of the e-filing website during the last few days may make the whole online filing quite frustrating, causing needless delay.
Filing return after the due date, may lead to empty the pockets of the taxpayer who have incurred losses; which he wants to carry-forward to future years. Under the tax laws, some losses are not allowed to be carried forward for being set-off against future income, unless the return has been filed by the due date, even though all the taxes have been pre-paid.
Similarly, if a paper return is filed, the acknowledgement slip should be preserved carefully.
For details , you should look at the article “How to miss your tax return filing deadline and still Enjoy”
A little extra care, planning & precaution on the part of taxpayers can help them avoid committing mistakes, while filing the tax return and keep away, unwelcome visits from the taxman.
It was a guest post by Rishabh Parakh, who is the director of Money Plant Consulting
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