Worried about income tax filing this year? Here are tips
August, 07th 2015
As the time for filing taxes draws near, it is important to look at the essentials while filing your returns. The government has made a sea change in the way one files taxes this year, starting with the forms, the details required, etc. Let us take a deeper look at the essentials for filing your tax returns.
This year, there have been many new additions to the tax filing process, some making it easier, such as fully paperless filing, and some making it more cumbersome, such as disclosing all foreign assets.
Before getting into this detail, it is important to keep one very important thing in mind. Even if your only source of income is your salary, and the tax has been fully deducted at source, it is important to file a ‘nil return’ if your annual income is less than Rs. 2.5 Lakhs, as not filing returns is an offense, with penalties ranging from Rs. 5,000 to Rs. 2 lakhs.
There are seven different types of forms, of which one has to choose the applicable form to fill out. Let us take a look at these forms:
• ITR 1 - For individual tax payers with income from salary, single property rental income or income from investments • ITR 2A - For individual tax payers with income from salary, multiple property rental income or income from other sources • ITR 2 - For individual tax payers with income from salary, multiple property rental income or income from other sources or capital gains • ITR 3 - For partners in firms with income from salary, multiple property rental income, capital gains, other sources or partnership firm’s profits • ITR 4 - For individuals with income from proprietorship business, professional income or commission income • ITR 4S - For businesses, agricultural income, commission income, income from foreign sources • ITR 5 - For all tax payers who e-file the returns but do not use digital signature or EVC to verify the returns
The new forms include areas in which you need to fill out foreign assets, bank details, etc. - even if not in operation. Details such as foreign bank holdings (in your name or if you are the beneficiary), date of opening the account, interest on this holding, etc. are required. Apart from this, under rental income there is now a sub-classification - ‘let out’ and ‘deemed to be let out’. This means that even if the property is unoccupied or you are not earning income from it, you need to pay taxes on this. That is, you need to pay taxes on notional income earned on the property based on the prevailing rental in that area.
Other details such as details of property owned outside India, income earned under double taxation treaties, capital gains from property - and utilization year-wise, are some of the other points that are now being monitored closely.
In the current year, there is one boon to tax payers, the filing will become truly paperless. Till last year, one had to fill out the forms and upload it online, then print, sign and send the ITR V to the CPC in Bengaluru for processing. Now, the government has enabled fully online verification of the tax payer.
The procedure for filing online is simple, one needs to file the taxes online (similar to previous years), post which one needs to generate and electronic verification code (EVC) - which will be unique for each PAN number. This code can be generated through multiple ways, such as via net banking (major banks have this option), via a registered mobile and email address, via entering their aadhaar number, and via an ATM using a credit or debit card.
This EVC will need to be entered with the e-filing, to verify your returns and make it a paperless process. However, the manual method of printing it out and sending the ITR V to the CPC is still available for those who prefer that method.
Summary: • The tax forms have changed this year - select them carefully • Details of foreign assets, etc are mandatory • E-filing is now paperless