The tax-return filing deadline is five weeks away and it is time you sat down with the required documents, calculated your liabilities or sent a refund receipt. If you are a salaried employee, Form 16 is the first document to get hold of and most of you should have received it already. If not, start hounding your HR department immediately. Going by current rules and limits, most will be in the online tax-filing category. If your income is more than Rs 5 lakh, e-filing is manadatory. Plus, if you want to claim a refund or your interest earning from savings bank account tops Rs 10,000, e-filing is mandatory. You can file using the tax department's site while there are a few online platforms with better interfaces.
Whichever option you use, here are five things to take care of when filing your tax returns online.
1. Reading your Form 16 While on the government site you have to file the numbers yourself, some websites such as ClearTax.com lets you upload your Form 16 on the platform and directly picks up the correct figures from the form. However, you should cross-check the figures and ensure they are correct, especially if you had switched jobs and have more than one Form 16 to refer to.You would have to recalculate your tax liability accordingly.
A common mistake is confusion between the 'net taxable income' and 'gross taxable income'. While tax is calculated on your 'net taxable income' you have to report the 'gross taxable income' -- income before deductions in your ITR form. If you are filing ITR 1, you can simply pick the figure under the head "income chargeable under the head salary. However, if your are filing ITR 2 or 2A, you will have to provide a break-up of your income. "Salary is typically reflected at item 1(a) in Form 16, allowances exempt under Section 10 are item 2, value of perquisites is item 1(b) and profits in lieu of salary are shown under 1(c)," says Vaibhav Sankla, director, H&R Block India. Allowances that are not tax exempt are either shown under item 1(d) or, if already included in your salary figure and not reflected separately, will be reflected in an annexure that was issued with the Form 16.
"Taxpayers many time makes mistake in reporting this break-up correctly especially they get confused between the exempt and nonexempt allowance, " says Sankla. Next, ensure that no deductions have been missed. Check whether the PF and HRA deductions have been chosen correctly. If you had changed job or forgot to submit proof of investments to your employer, you will have to manually enter data for these deductions. Your Form 16 also has the correct employer name, address and TAN. Make sure you Make sure you pick this information from here as bigger companies may have multiple registered offices. In the case of online businesses, the registered company name often differs from the more popular domain name.
2. Which form to fill If you using the online platforms, this is an automated process. "The correct ITR form gets selected automatically on the basis of the information provided by the taxpayer," says Archit Gupta, CEO, ClearTax.com. However, if you are using the government site, you need to know which form is for you. Each form has it's limitations. For one, you may have income from salary only but you can't file ITR 1 if you own more than one house or have gained from trading in shares. If you own more than one house and do not have capital gains or foreign income or assets, you can file ITR 2A. Similarly, ITR 4S is a much simpler form to fill compared to the bulky 20-page-long ITR 4, if you have income from a business or are a freelancer. If you choose ITR 4S, there is no need to maintain books, profit &loss statements or audits. You don't have to pay advance tax either. However, your business's gross receipts or turnover of the business should not be more than Rs 1 crore and it should not be registered as a company. Your tax liability would be calculated on the basis of a 'presumed business income', irrespective of what your actual income may be. Section of the Income-Tax Act says under the presumptive method, the net income is estimated to be 8% of gross receipts for businesses. This year onwards, even freelancers earning less than Rs 50 lakh per annum can also file ITR 4S. "A new section has been inserted in the I-T Act Section 44ADA under which professionals with receipts of Rs 50 lakh or less could opt for the presumptive scheme. Their income shall be assumed to be 50% of their receipts," says Gupta. So, if you have profits less than the presumptive rate, you may still want to file the lengthier Form 4.
3. TDS and Form 26AS You need to cross-check your TDS deductions with the figures reflected in Form 26AS, especially if you have interest income from bank deposits or any other sources. Form 26AS also records interest income in cases where Form 15 G/H is submitted by the taxpayer. So, in case you have erroneously submit these forms where there was a tax liability, you should make corrections. "The taxpayer should add this interest income to the list of 'income from other sources' and compute the tax liability calculated as per tax slab rate," says Sankla. Form 26AS can be downloaded from the TRACES site. The tax department's e-filing site also provides a link. However, be careful while selecting the Assesment Year (AY). "Taxpayers get confused between Assessment Year (AY) and Financial Year (FY) and they end up filling up wrong year's data in the return form. This may result in a huge tax demand due to tax credit mismatch," warns Sankla. AY is the year in which you file returns. For instance, income earned between April 1, 2015 and March 31, 2016, will be taxed in AY 2016-17.
4. Declaring 'Income from Other Sources' , capital gains Once you have figured out Form 16, it is merely copying figures from it on the ITR Form. But if you have income from other sources you need to be careful. Lately, the sleuths have become vigilant and you may end up with a notice. Income from other sources is a residuary head of income: income not chargeable under any other head is chargeable under this head. All income other than income from salary, house property, business and profession or capital gains is covered under 'income from other sources'. Typical incomes under this head include interest on bank or other deposits, taxable dividends, income from securities by way of interest, pension received by the legal heirs of an employee, income from subletting, winnings from lotteries, races and gambling.
Do not miss out reporting income from a second house. Even if it is not rented out, you have to pay a tax on the basis on 'deemed income'. Good thing is that if you have incurred any specific expenses for earning any of the above income then you can claim deduction for the same too. Capital gains or losses is another section where taxpayers tend to make mistakes. Capital gains/losses have to be reported in Schedule CG of form ITR 2.
5. How to e-verify You may have filed your returns on time but the tax-filing process is incomplete if ITR-V doesn't reach the department within the stipulated time. You won't get your refunds and worse, your returns filing won't be considered valid if the department doesn't receive a signed or verified copy of ITR V within 120 days of filing the returns. Apart from mailing the ITR V to the CPC in Bengaluru, you can now e-verify by linking your Aadhaar or through netbanking. For Aadhaar-linked verification, you have to be registered on e-filing site and provide your Aadhaar number. Once the validation is done, you will receive an OTP (which will be your electronic verification code) on your Aadhaar registered mobile number, which will be valid for the next 10 minutes. Submit this to e-verify your ITR V. In case your PAN and Aadhaar details don't match or you are still not registered under UIDAI, verify using your netbanking account.