 | « Back to article | Print this article |
Filing tax returns? A checklist of things to do
With the financial year drawing to a close, it is time to turn our attention to filing tax returns for the year gone by.
After the fiscal year end, you have four months -- upto July 31 to file the returns.
Yet, many of us wait till the last minute, owing to the human tendency of procrastination and then hope for an extension of the deadline.
However, this year could be different -- why not get over and done with your return filing early -- perhaps by the end of April itself?
Click NEXT to read further. . .
Filing tax returns? A checklist of things to do
Plus, having time on your side means that any inadvertent errors or oversights on account of rushing matters may be avoided.
Besides, the tax return preparation process is really simple.
First of all, a taxpayer need not file a tax return unless his or her income is above Rs 180,000.
For ladies this limit is Rs 190,000 and for senior citizens (60 years and above), the limit is Rs 250,000.
A new category of taxpayers was also introduced in the last Budget -- the very senior citizen.
These are resident individuals who are 80 years or above.
Their basic exemption limit has been fixed at Rs 500,000.
Click NEXT to read further. . .
Filing tax returns? A checklist of things to do
In other words, if your total income is below the above mentioned basic exemptions, there is no legal requirement to go through the entire return filing process.
Earlier, even if your income was below this threshold, if you were covered under the ambit of what was called the one by six scheme, the tax return had to be filed.
This scheme essentially meant that if you satisfied any one of the various conditions such as owning a telephone connection, a house property, having an electricity bill of over Rs 50,000 a year and so on, then regardless of the income level, it was obligatory to file a tax return.
Click NEXT to read further. . .
Filing tax returns? A checklist of things to do
This is not applicable now and as far as the current year's tax return is concerned, you are required to file only if you have a taxable income above the basic exemption limit.
What is taxable income?
It implies the gross amount of income that you earn before claiming any deductions.
For example, say a senior citizen, earns an income of Rs 300,000.
During the year, he invests Rs 70,000 in PPF thereby bringing his income down to Rs 230,000.
Now, even if Rs 230,000 is below the basic exemption of Rs 240,000, he will have to file his tax return since his gross income of Rs 300,000 was above the threshold limit.
Click NEXT to read further. . .
Filing tax returns? A checklist of things to do
Sources of income: Any income earned can be basically categorised under specific heads which are quite exhaustive:
Income from salary
- Income from house property
- Income from business and profession
- Income from capital gains
- Income from other sources
The tax return filing process can thus be reduced to filling in the details of income at the appropriate place in the tax return.
Click NEXT to read further. . .
Filing tax returns? A checklist of things to do
Salaried individuals receive the Form 16 from their employer.
The form gives full details and break-up of the salary income.
It can be used to fill in the requisite details in the tax return form.
Income from house property implies the rental income of a landlord.
Business or professional income is -- the net income left after deducting expenses incurred for running the business, subject to tax.
Capital gain (short- or long-term) is earned when you sell mutual fund units, shares or property.
Click NEXT to read further. . .
Filing tax returns? A checklist of things to do
The last head is the residuary head which basically includes any interest income earned, such as that on fixed deposits, RBI bonds and so on.
An aggregation of all the above incomes should be above the basic exemption limit for you to be liable to pay taxes or to file a tax return.
The rate of taxation would depend upon the applicable slab. Of course, interest incomes that are specifically tax exempt (like PPF interest) aren't to be considered in order to arrive at the total taxable income.
Click NEXT to read further. . .
Filing tax returns? A checklist of things to do
Return filing process: Basically, it is all about filling in the correct numbers.
The earlier two-page form SARAL, was quite the opposite of its meaning.
Along with the income figures, you needed to specify the computations leading to the numbers.
This had to be provided by way of a separate annexure.
As a result the tax return became quite bulky and complicated.
Also, each person attached his own version of the annexures leading to inconsistencies in the tax return even in respect of similar income heads.
Click NEXT to read further. . .
Filing tax returns? A checklist of things to do
Also, SARAL was a one size fits all kind of a solution.
This meant that whether you were an employee or a businessman, a senior citizen or a stock trader, the same form had to be used.
In the new regime though one is categorised as a specific type of a taxpayer, based on the nature of income earned, simplifying matters.
For most senior citizens, the newly introduced SAHAJ form is required.
The forms come with clear instructions for filling it.
Click NEXT to read further. . .
Filing tax returns? A checklist of things to do
It is literally as simple as filling in the blanks.
The forms are available on the income tax website.
It is advisable to go through these forms and familiarise oneself with them only post March 31.
Reason: New forms are introduced each year with minor modifications, if any.
These new forms do not require taxpayers to provide any additional information by way of annexures or even attach any additional documents.
The process of filing the tax return is quite straightforward and totally hassle free.
The key is to ensure that you start early and have time on your side.
The writer is Director, Wonderland Consultants
