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It's that time of the year again. The taxman will soon knock at your door. Your HR manager will soon start breathing down your neck for those innumerable bits and pieces of cumbersome paper- receipts and vouchers for rent, investments, medical/ conveyance allowances….the list goes on. Here are some tips to make things easier.
Do I have to submit a tax return even if I have no taxable income?
Yes, you do. You will still have to file a return. Nobody can escape filing a tax return sooner or later.
Do I have to submit a tax return even if I am only a salaried employee?
Yes, you do. It does not matter that you are a salaried employee whose taxes are fully deducted at source anyway. You will still have to file a return.
What happens if I do not file a tax return?
Where, as a result of failure to file the return, the tax evasion exceeds Rs. 1 lakh, the penalty is a fine and imprisonment that could vary in term between 6 months to 7 years. In other cases, it could be a fine and imprisonment of 3 months to 3 years.
Over and above this, Sec. 271F imposes a penalty of Rs. 1,000 for late furnishing of returns in normal cases and Rs. 500 for those which fulfill certain criteria.
Also, if the income under business, profession, capital gains or house property is a loss, the return must be filed within the prescribed time limit. Otherwise the benefit of carry forward of loss is not admissible.
Where can I obtain a form?
Simply click here to download. If you are a salaried person, you will fill out a form called Saral and which in official lingo passes as Form 2D. This form is essentially meant for individuals, more specifically, assessees other than companies and persons who are claiming exemption under Section 11.
Is it just one form or are there many forms that I need to fill out?
There is only one form. Saral consists of 31 items and a basic declaration from you. The form has to be submitted in duplicate. That
means you need to submit two copies of the same form. The person at the counter will return one of the copies duly acknowledged. You should preserve this carefully.
Can I fill out the form on my own or is it so difficult that I need a consultant?
The form, Saral, has never been more simple. Of course it could be simpler but the finance minister cannot be faulted for not trying. If you are finding it too difficult, log on to myiris.com and check out for live chats with our panel of tax experts.
The form asks for my Permanent Account Number. What is it?
It is a number unique you, ten characters long. Allotted to you by the Income Tax department, it will help identify you throughout your entire life as an Indian citizen. You will get a card with your photograph on it with details alongwith pertaining to you including your Permanent Account Number (PAN), your date of birth, your father's Name along with your name and signature.
If I do not have a PAN number will I get into trouble if I file a return?
No. You will get into trouble only if you do not file a return. You will also get into trouble if you have not applied for a PAN if you meet any of the criteria that makes it mandatory for you to have a PAN. It is best that you file your return and apply for a PAN immediately if you have not done so already.
I have a side business. How do I deal with this?
This is fairly straight forward. Remember to attach annexures stating the computation of income from the business or profession, the profit and loss account, balance sheet with the relevant enclosures, including auditor's certificate along with the return. Take care to suitably modify and adjust any disallowable expenses, claims, brought forward losses,depreciation etc., if any, to arrive at the accurate taxable profit or deductible loss if any.
What do I report under the head "income of any other person"?
Certain actions of assessees give rise to the clubbing provisions of the Act. For example, income from investment gifted to spouse or minor children has to be included and taxed in the assessee's own hands. Any such items have to be clearly stated and shown here.
What do they mean by income from other sources?
Net income from other sources such as interest, income from UTI/MFs, interest on bank FDs etc. is what the tax man has in mind. Even though the most common income sources such as dividends from shares and MFs or even UTI are completely exempt from tax, it is still necessary to lay out details of such incomes in a separate annexure to be attached with the return.
What are the deductions under chapter VI-A referred to in the form?
Some of the more relevant deductions applicable to the common person in daily life, subject to the proviso that the aggregate amount of deductions should not, in any case, exceed the gross total income, are as follows.
Mediclaim : Sec. 80D
Deduction upto Rs. 10,000 is allowed in respect of medical insurance premiums paid by cheque by an individual to benefit the assessee and dependent family including spouse, children, and parents. The same benefit is also available to an HUF for its members. For senior citizens, the deduction is raised to Rs. 15,000. However, premiums paid by senior citizens for covering health of their children, dependent or otherwise, are not eligible for the deduction.
Handicapped Dependent : Sec. 80DD
Following the merger of Sec. 80DDA with 80DD, the total deductible amount was raised from Rs. 35,000 to Rs. 40,000. Sec. 80DD stipulated that a resident individual or a member of HUF having a dependent relative who suffers from a permanent physical disability (including blindness) or mental retardation was entitled to a deduction of Rs. 20,000 in a year for medical treatment, training or rehabilitation.Payment to LIC's 'Jeevan Aadhar' and UTI's 'Special Plan for the Handicapped' specially designed for such persons was covered by Sec. 80DDA, offering a deduction of Rs. 15,000. Deduction under section 80DD is statutory in nature and is allowed in full, irrespective of the actual expenditure incurred on medical treatment.
Treatment of protracted diseases: Sec. 80DDB
Exemption of Rs. 40,000 is allowed for expenditure on treatment of protracted diseases (spelled out) to an individual for herself or a dependent relative and to an HUF for any of its members. For senior citizen, this limit would be Rs. 60,000. However, any amount received by way of medical insurance has to be subtracted for arriving at the eligible deduction.
Loan for Higher Education : Sec. 80E
Repayment of loan as well as interest thereon by an individual taken from a bank, a notified financial institution or any approved charitable institution for higher education is deductible upto a ceiling of Rs. 25,000 (raised to Rs. 40,000 this last time around) per year for 8 successive years. Loans given by employers are not eligible. Higher education means studies for any graduate or post graduate course in engineering, medicine or management or a post- graduate course in applied or pure sciences, including mathematics and statistics.
Donations : Sec. 80G
An assessee is entitled to a deduction of 50% (and in some cases 100%) of donations made for approved charitable purposes. These donations must be in the form of money and not in kind, unless the donor is the manufacturer of the items donated. Some of these funds have an aggregate ceiling of 10% of gross total income, as reduced by the standard deduction under Section 16(i) as well as professional tax under Section 16(iii) and also by other permissible deductions under Chapter VI-A.
Accommodation expenses: Sec. 80GG
All assessees, including employees not getting HRA, paying rent for furnished or unfurnished accommodation in excess of 10% of their total income are entitled to a deduction of least of i) rent in excess of 10% of total income; ii) 25% of total income and iii) Rs. 2,000 per month. The deduction is not available if the accommodation is i) owned by the assessee or his spouse or minor child or the HUF of which he is a member at the place where he normally resides or has her office, employment, business or profession or ii) owned by him at any other place and occupied by him. The assessee is required to file a declaration in Form-10BA.
How do I then compute total income?
The 'total income' means income arrived at after giving effect to all the deductions but before this particular deduction. Most of the deductions having a ceiling have similar stipulations.
Interest and Dividend : Sec. 80L
Aggregate earnings from some specified sources are eligible for deduction upto of Rs. 15,000 from the taxable income out of which Rs. 3,000 was specially earmarked for government securities and UTI/MFs. However, now that UTI/MF(on equity schemes) income has become tax-free and since individuals do not normally go in for government securities, this special limit often goes unutilised. The schemes are :
Deposits with a) Banking Company or Co-operative Banks b) Co-operative Societies c) Approved financial corporations or public companies to provide long-term finance for industrial or agricultural development or for construction or purchase of residential houses; (the 'Home Loan Account Scheme' of National Housing Bank is not covered by Sec. 80L but it enjoys the benefit of tax rebate u/s 88), d) Industrial Development Bank of India and e) Housing Boards.
Small Savings Schemes —- a) National Savings Certificates VIIIth issue b) Post Office Time and Recurring Deposits c) National Savings Scheme, 1992 and d) Post Office Monthly Income Scheme.
Notified debentures of co-operative societies or institutions or public sector companies.
Physically Handicapped Person : Sec. 80U
A resident, who, at the end of the previous year, suffered from a permanent physical disability (including blindness) or was mentally retarded, which had the effect of reducing substantially her capacity to engage in gainful employment or occupation is entitled to an ad hoc deduction of Rs. 40,000. This deduction can be claimed, irrespective of the expenditure on the treatment or the duration of the disability. All that is required is to furnish a certificate, procured from practitioners working in government hospitals or specified associations for handicapped persons, in support of the claim in the first year for which the deduction is claimed.
How is agricultural income treated?
Agricultural income is not taxable. However, where an assessee has other income, it will be aggregated only for the rate purpose.
Have I paid advance tax?
If you have followed the rules, you have. All taxpayers are required to pay advance tax in spite of the fact that most income is subject to TDS or is tax-free.
If the tax payable for the year is Rs. 5,000 or more, advance tax is payable in 3 instalments during each financial year as follows :
On or before 15th September : 30% of estimated tax.
15th December : 60% less tax already paid.
15th March : 100% less tax already paid.
In the case of shortfalls of the first two instalments of advance tax, simple interest @1.5% per month is charged for 3 months (when the next instalment falls due) on the amount of shortfall of 30% or 60%. Even if the delay is just by one single day, the interest is payable for 3 months.
But what if I had unanticipated income and capital gains?
In this case, you are forgiven. Accordingly, no interest would be charged in respect of any income, which was neither anticipated nor contemplated, received after the date of first or subsequent installment of advance tax. However, it would be necessary to pay advance tax on such income at the next due date for advance tax.
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