The deadline for filing income tax returns is (July 31) fast approaching. While many may be filing returns through their chartered accountant, filing e-returns (electronic returns) is the fastest and more convenient. E-returns can be filed either through the Income Tax Departments website or through the website of e-returns intermediaries (ERIs) like TaxSpanner,etaxmentor, TaxSmile and so on. While the I-T department offers this facility free of cost, the ERIs charge a small fee for the same. Many chartered accountants also file your returns online.
While filing e-returns is not very difficult, you need to ensure that you file it properly, that is, primarily know all your income-liability details and some basics of taxation. Heres how -
Step 1: Know your situation Determine all your sources of income. Does your income comprises of only salary and interest on savings bank account? Or you also earn rental income, capital gains and / or income from any other source? Considering the following aspects may help.
If you have more than one house and the other house is not rented out, you will still require to pay tax on notional rental income. If you took a loan to buy or construct such house, actual interest on borrowed capital is also deductible. And there is no restriction of Rs 1.50 lakh for interest repayment on housing loan in case of self occupied second property.
If you received any gifts from your friends (other than relatives) in the form of money or property exceeding a total of Rs 50,000 annually, you need to pay tax on the same. Here property means, immovable property, shares, jewellery, bullion, archaeological collections, drawings, painting, sculptures and any work of art. Gifts received on the occasions of marriage or through a Will or inheritance are not taxable.
Did you make any investments in the name of your spouse or minor children. You need to include interest income from such investments in your income before calculating tax liability. For minor childs income you may avail a deduction of Rs 1,500 per child.
Which income is it applicable for?
Salaries House Property (one house property) Other Sources (except income from lottery or horse race)
Not applicable for income from business and profession
Partners not carrying out business / profession as a proprietorship concern
Proprietary business or profession
Business / profession and opted for taxation on presumptive basis under Sections 44AD and 44AE
Step 2: Compile details of income and taxes Tally your details in Form 16 and Form 16A with the details contained in Form 26AS available on the income tax website. You get tax credit withheld, as in Form 26AS. In case of any discrepancy, get in touch with the income payer to get the details rectified else you may get a tax notice when your return is being processed.
You need to pay taxes if you fall in the 20 or 30 per cent bracket as the withholding tax calculated by the payer (other than employer) is generally lower than your actual liability. If the taxes due are more than Rs 10,000 you would also need to pay interest under Section 234 B and 234C if you havent paid advance taxes. Also register your PAN on the I-T departments website.
Step 3: Select the right form If you have any assets or signing powers for account(s) overseas, you would need to use ITR 2, although you can use form ITR 1. (See Table) Do not forget to report exempt income like dividends, interest on PPF, long term capital gains and so on. Fill your bank account details and MICR code carefully to avoid any difficulty in receiving the refund.
After e-filing, you should send the Income Tax Return Verification form (ITR-V) in 120 days of filing the e-returns only by ordinary post or speed post. Do check the status of your ITR-V, that is, if it has reached the I-T Departments Bangalore office. If not, re-send the same immediately lest the 120 days deadline gets over.
Finally, have a look at your assets to check if or not you have any wealth tax obligation. If you do have, you need to file the wealth tax return before July 31. Wealth tax is payable at one per cent on net taxable wealth exceeding Rs 30 lakh held on the last day of the tax year, like March 31, 2012 for the assessment year 2012-13.
Any building or land, motor car, jewellery, bullion, furniture, utensil made of precious metal (wholly or partly), cash in excess of Rs 50,000 and so on, is considered taxable wealth. But deposits in banks, shares and the likes, are not considered one. Further, a residential property or a piece of land (not exceeding 500 square meter), house rented out for more than 300 days is also exempted from wealth tax. If you took any loan to acquire taxable assets, the same is deductible while computing the net taxable wealth.
If you are permanently coming back to India (being person of Indian origin or a citizen residing abroad), you are exempted to pay wealth tax for a period of 7 years for the money and/or assets bought into India from abroad. The exemption will also apply to the assets which you acquired in the last one year of your return or acquire any time thereafter from the money you bought from abroad into India.
Step 4: Maintain documents after e-filing Always maintain your bank statements, Form 16 and 16As, proof of other income and/or of exemption claimed and so on even after youve finished e-filing and got a receipt for tax return.
You may be required to produce these documents before the I-T authorities if your return is selected for an audit. In case of change in your address, immediately get the same changed in your PAN.