Category Archives: Know your Tax Laws(Series)

Do’s and Don’ts before you print and submit ITR V to Bengaluru CPC!

You must be aware of the fact that return filing process gets completed only when you send ITR-V copy to CPC office. Let’s understand the last and the most important process to complete your tax filing:

What is ITR-V?

ITR-V is a short form for ‘Income Tax Return – Verification’ form which works as your acknowledgement copy. It is required by department to verify the authenticity of your tax return filed online.

ITR-V Form
ITR-V Form

 

Do’s and Don’ts before printing and submitting ITR V to Bengaluru CPC:

  1. Always use Ink Jet /Laser printer to print the ITR-V Form.  Avoid Dot Matrix printer
  2. Use Only BLACK ink for PRINTING ITR-V.
  3. Do not print any watermark on ITR-V. The only Permissible watermark is that of Income Tax department which is printed automatically on each ITR-V.
  4. Do not send light print/faded copy, Make sure Print out is clear and readable.
  5. Use only BLUE” ink pen to SIGN on ITR-V.
  6. Photocopy of ITR V with signatures will not be accepted.
  7. Do not right anything or sign on Bar Code.
  8. Bar code and numbers below bar code should be clearly visible.
  9. Use only A4 size paper to print ITR-V & avoid perforated paper.
  10. Do not type anything on the backside of ITR-V.
  11. Do not staple ITR V acknowledgement.
  12. For submitting original and revised returns, use two separate papers for printing ITR-Vs.
  13. You can send more than one ITR-V in same envelope.
  14. You are not required to submit any annexure or a letter etc. along with ITR-V.
  15. ITR-Vs that do not confirm to the above specifications may get rejected or acknowledgement of receipt may get delayed.

Where do you need to send ITR V?

You need to send ITR V to “Income Tax Department – CPC, Post Bag No – 1, Electronic City Post Office, Bengaluru – 560100, Karnataka” by ordinary post or speed post only. CPC office will send an e-mail acknowledging the receipt of ITR-V to the email id entered in the return form.  Please note that ITR-V shall not be received in any other office of the IT Department or in any other manner.

(You can also read this article as published In DAN newspaper on July 31 2013 at http://www.dnaindia.com/pune/1867762/report-know-your-tax-laws-vi)

How to file Income Tax Returns online? A Step by Step guide to File your tax return

In continuation to our “Know your tax laws” series, Chartered Accountant & Founder Director of Money Plant Consulting, Rishabh Parakh explains in a detailed way as how you can file your tax return online while still seating at your home. Please follow these simple steps and get your tax figures right.

Section 1: Few Warm up questions before you start!

Q. I have a permanent account number (PAN). Do I still need to file IT Return?

A. Just having a PAN number does not mean that you need to compulsory file your tax return. As per Income tax Act, You are required to file a “Return of Income”, if your taxable income exceeds Rs 2 lakh in a particular financial year. However you need to have a PAN in order to file tax returns. It’s like having a driving license does not mean that you have to compulsory drive but if you want to drive then you must have a driving license.

Q. Who needs to file Income tax Return?

A. As seen above everybody earning more than basic exemption limit need to file his or her return and till last year two assessment years salaried taxpayers earning less than 5 lakh p.a. and having income from interest less than 10000 p.a. were

image1exempted from filing income tax return. This said exemption is not extended to this assessment year as seen in my previous article.

Q. What are the benefits of filling income tax returns (ITR)?

A. Filing returns or not has never been a choice as it’s a legal obligation and must be fulfilled by everyone who falls under the prescribed category. Though apart from a legal obligation, filing tax return is always helpful in the following situations:

  • For availing loan facility like home, or personal.
  • For visa and immigration processing
  • You can use it as an income proof/ Net worth certificate
  • For claiming excess tax paid via refund
  • Applying for a higher insurance cover
  • And last and most important is your peace of mind

Q. My tax is already deducted at source by my employer and paid to the government, then why do I need to file tax return?

Although tax has been deducted and there is no further liability to pay tax, you have to compulsorily file your income tax return if your income exceeds the basic exemption limit. It will work as a declaration to the government that you have derived only income from salary or any other source, for e.g. getting NOC from library on leaving college even though you had not steeped inside library once.

Q. I have not been able to submit my Investment details for e.g. life insurance premium etc. to my employer and excess tax has been deducted. So can I still declare & claim the benefit?

A. Yes, you can claim these benefits while filing Income Tax returns and can submit your refund claim.

Section 2:

Know your situation!

First determine sources of your total income. Does your income comprise of only salary and interest on savings bank account or you also earn rental income, capital gains or income from any other source? Let’s see different heads and “Sources of Income” as per Income Tax Act as follows:

  • Salary
  • Rental income from House Property
  • Profit & gains from Business or Profession
  • Capital gains on sale of shares or mutual funds or capital assets
  • Other sources like bank interests etc.

So you need to add income under each “Head” and then compute your taxes. Don’t forget to include income received by your minor kid. A minor is not required to file a separate return of income but income arising on account of let’s say interest on FDs in the name of your minor kid needs to be clubbed in parents income.

Know your Tax Slab!

                                          Tax Rates For All Income Levels*      
Tax Rate      0%       10%         20%          30%
Male/Female 0 –  2Lakh 2 – 5Lakh 5-10Lakh 10Lakh & above
Senior citizens(age 60-79)  0 – 2.5Lakh 2.5 –5Lakh 5-10Lakh 10Lakh & above
Very senior Citizen(Age above 80) 0 – 5Lakh 5-10Lakh 10Lakh & above

*+ Education cess of 3% on applicable tax rate

Section 3 : What are the documents you need to arrange before you start filing?

Ø  Form No.16: Issued by your employer summarising your income from salary and tax deducted at source.

Ø  Form no 16A: Issued by all the payers who have deducted tax while making payment to you during the year. For example Banks where you have FDs.

Ø  A/C statements: All your operating accounts during the year for arriving at interest income earned during the year.

Ø  Property details: If you have bought any property or put up existing property on rent then details for the rent received and receipts of municipal taxes paid during the year would be required. If the same is purchased through a loan then copy of loan certificates for interest & principal.

Ø  Contract Notes: For sale & purchase of shares during the year for calculating capital gains.

Ø   Tax Challans: Details of tax payments made during the year in case you have made advance tax or self assessment payments.

Ø  Others: Any other documents for a financial transaction involving tax implications for computing your taxes.

Important PointYou don’t need to submit any of these copies to the I-T department at the time of filing and even originals are also not required to be given to your CA, if you are taking professional help. These documents are required to help you prepare your tax computation and you do need to keep these copies ready in your file/records in case if IT department asks you to furnish the same at a later stage.

 

How to select applicable  ITR1,ITR2, ITR3 or ITR4 forms?

Let’s see which ITR form is applicable to you as follows:

 Form no. Applicability For A.Y. 2013-14
 ITR 1SAHAJ Individuals who have;a)Income from Salaryb) Having exempt income less than Rs. 5000*

c) Income from up to one housing property.

  ITR 2 Individuals witha) Exempt income of more than Rs. 5,000*b) Not having any income from business or professionc) Overseas Income and

d) Income from more than one house property.

ITR 3 Individuals/HUF bring partners in firm and not carrying  out business or professions and Individuals having Income more than 25 lakh needs to submit a report of their Assets and Liabilities.
ITR 4 Individuals/HUF having income from a proprietary business or profession and Individuals having Income more than 25 lakh needs to submit a report of their Assets and Liabilities.
ITR 4SSUGAM Individuals who earned incomea) That is computed under section 44AD and 44AEb) From one house property with last year’s loss carried forward

*Note: Exempt Income Include Income not chargeable for Tax, which include Dividend, Provident Fund Interest and I believe that this Rs 5,000 limit for exempt income does not include HRA/ LTA or any other allowances which a taxpayer receives from his or her employer, clarity is needed on this.

 How to file Income Tax return ?efilinglogo

 

If your income is more than Rs. 5 lakh then you need to compulsory file your returns online and persons earning less than Rs. 5 lakh  have an option to  file their return online or via physical mode. Manual filing can be done through the special desks setup by the IT department.  Let’s see how can you file your returns online by seating at your home.

Steps by step guide to file Income Tax Return online

1.           You need to go to the IT department’s official website www.incometaxindiaefiling.gov.in

2.           You can see an image at the centre “e-file your tax return”  and a click button option: e-file>>, click on the same,

3.           If you are a first time user i.e. if you have never e-filed your returns you will need to registerfirst, with the site and create a user name and password.

4.           You will need your PAN card number for the same. Your address details are extracted from the PAN. You must enter personal details carefully.

5.           Now select the appropriate ITR form  using the detailed table above.

6.           Download the Return Preparation Software (Excel Form) based on your sources of income.

7.           Then fill up all the mandatory fields in the form, particularly ensure that you have written your PAN number correctly.

8.           Then pressing the ‘Calculate Tax’ button/tab on the form tells you how much tax you need to pay or how much refund you will get.

9.           If there is any tax to be paid then make an online payment and generate the challan counterfoil.

10.      Then pressing the ‘Validate’ button on top of each form tells you whether you have filled up the forms correctly.

11.      Once validated, press the ‘Generate XML’ button on the top right of the form and an XML version of the form gets created on your PC.

12.      After checking the details of your ITR click on ‘Submit return’.

13.      Select the XML file and click ‘Upload’. Once the uploading is successful it will be acknowledged on the screen.

14.      Click on ‘Print’ to get a copy of the ITR-V form.

If the return has a digital signature then the filing process is complete upon the acknowledgement notification. But if it does not have a digital signature then the ITR-V form needs to be printed. ITR-V is an acknowledgment as well as a verification form and all the details need to be filled in and verified. The tax payer has to fill-up the verification part and verify the same.

If the return has a digital signature then the filing process is complete upon the acknowledgement notification. But if it does not have a digital signature then the ITR-V form needs to be printed. ITR-V is an acknowledgment as well as a verification form and all the details need to be filled in and verified. The tax payer has to fill-up the verification part and verify the same.

A duly verified ITR-V form should be mailed to “Income Tax Department – CPC, Post Bag No – 1, Electronic City Post Office, Bangalore – 560100, Karnataka, BY ORDINARY POST OR SPEEDPOST ONLY within 120 days after the date of transmitting the data electronically.

Section 5: Mistakes to avoid while Filing Income Tax Return:

1. Selecting the wrong ITR form:

This is the first thing you have to be careful about as if you make a mistake in choosing the right form, the entire exercise of filling will be of no use. Please carefully select the form applicable to you.

2. Not filing online returns if you earn over 5 lakh:

The government has made it compulsory for the individuals with an income of more than Rs. 5 lakh to file tax returns for the financial year 2012-13, so make sure that you file your returns if your gross total income is more than 5 lakh.

3. Providing incorrect details:

Since all the necessary information is communicated by the IT dept. via email or post, it is extremely important to enter these details correctly. For your physical address, it is always safer to give a permanent address instead of your rented accommodation. In fact, email is a preferred route for communication for the income-tax dept. Avoid giving your office email id; instead give a personal email account id, which you can continue to use even after changing your job and once your official mail id ceases to exist.

4. Not reporting all the sources of income:

Many taxpayers fail to report all the sources of their income. The most common is interest earned on a bank savings account & on FDs. Though for the current year interest up to Rs. 10,000/- on savings a/c is exempt from tax (not on FDs).

5. Declare both or multiple form 16:

As seen in my previous article, please compute your taxes by including income from all the employers in case of change in job.

6. Not sending ITR-V before deadline:

 You need to send ITR-V copy by ordinary post or speed post only to CPC Bengaluru within 120 days from the date of electronic filing in case you have e-filed your return without digital signature. The process of Filing is complete only when you send ITR-V & it gets accepted at CPC office, Bengaluru.

Few misconceptions about Income Tax:

I need a CA to file my returns as filing taxes is a complex process!

With technology becoming so advance gone are the days when you have to fill up the form manually and running from pillar to post to get the IT dept. “Stamp”. Now you can easily file your returns Online and that too free of cost through IT dept’s website.

Maximum deduction for the interest which I pay on my home loan is only up to Rs. 1,50,000 p.a.!

This is correct but only for the house which is “Self Occupied” as for a property which is put up on rent, the entire interest paid on the loan can be claimed as a deduction from your income on house property without the restriction of Rs. 150000/-.

Benefit for reimbursement of Medical bills submitted to employer & Mediclaim (Health Insurance Premium) is same!

Medical reimbursement by your employer for an amount up to Rs.15,000 p.a. is different from the amount of premium you or your employer pays towards mediclaim policies & deduction for the same is available under Section 80D. Both these exemptions are covered under different sections of the Income Tax Act and you can enjoy benefits for both.

 I can avail benefits of section 80C only by making certain investments!

Apart from investing in saving options as listed u/s 80C  you can also claim deductions for certain expenses like school or university tuition fees you pay for your children, repayment of principal on home loan and stamp duty & registration charges on buying a house.

Concluding Note:

I would strongly suggest all the readers to follow the above process diligently and file your taxes with utmost care as mentioned in the article. The next two articles to conclude the series would be on “Can you afford to file your tax returns after 31s July!” and “Do’s and Don’ts of sending ITR V to CPC Bengaluru office”.

So stay tuned and happy filing.

 CA Rishabh Parakh

—————————————————————————————————————————————————————–

Did you change your job last year?

You may have to pay Taxes before filing your tax returns!

Kapil changed his job in the previous financial year which was a progressive moment in his life. But he received a shock of his life when he went to file his tax return and was informed to pay outstanding tax before he can file his return. This left him wondering as “Why do he need to pay additional tax” as both his employers had already deducted the same. Let’s understand the tax implications in these kinds of cases.

Taxes-Due

 Is this sudden tax liability really an “Additional Tax”?

No, this is not at all an “Additional Tax” as it looked like to be. This happened because of the way your tax gets calculated when you change jobs as both the employers deduct tax by taking in to account the income given by them only and I’m assuming that you have not given previous employer income details to the new employer.

Under what scenario you may end up paying taxes?

Scenario 1: You failed to provide income from previous employer to your new employer!

In such scenario both employers will consider the income given by them as your annual income and deduct tax on that income only, which may result in less TDS then what should be payable.

Let’s see Kapil’s case in detail, he worked for two companies say “XYZ” & “ABC”. In the following example I have assumed Income to be net i.e. after deducting all the available exemptions and deductions under IT Act based on employee’s declaration.

Company Work duration Per month income Actual Income
XYZ 6 months (April-September) 30,000 180,000
ABC 6 months (October-March) 35,000 2,10,000

 Tax calculation by respective companies:

Particulars   Company “XYZ” Company “ABC”
Net Taxable Income Rs. 1,80,000* Rs. 2,10,000*
Tax Slab applicable Nil (since its less than 2,00,000) 10% ( between Rs.2 lakh to 5 lakh)
Tax Deducted Nil 1000 (210000-200000)*10%

 For the sake of simple understanding I have not used the standard way of calculating TDS and payments in monthly instalments by these companies. I have considered simple tax liability by taking each company’s income separately so that you can see the main reason why Kapil is suppose to pay “Additional Tax”.

What should be the correct and final tax calculation!

Total Income* Rs. 390000 (180000+210000)
Tax Slab 10%
Actual Tax liability 19,000 [(390000 200000)*10%] Up to first Rs. 2 lakh is exempt from income tax)
Balance Tax payable Rs. 18000 i.e. 19000 – 1000 TDS already paid exclusive of interest penalty

This 18000 is not an additional tax but it was supposed to deducted by way of TDS and should have been paid round the year had he worked in the same company.

Scenario 2: Claiming Exemptions & Deductions twice!

All the exemptions say HRA or Deductions like 80C can be claimed only once and subject to specific limits but many times these gets considered in both the form 16 resulting in double deduction and less TDS.

(You can also read the original article as published In DNA on July 28 2013

https://www.google.com/url?sa=f&rct=j&url=http://www.dnaindia.com/pune/1866468/report-know-your-tax-laws-iv-did-you-change-your-job-last-year&q=&esrc=s&ei=iWr7UeOuJojBrAeji4DgBQ&usg=AFQjCNE76EsAsM8xPTlGC0GF0N38CiNgoQ)

Is your “Salary” less than Rs. 5 lakh p.a.? Gear up to file your taxes now, read more!

I believe you must be aware about the benefit provided to all the salaried individuals in the form of an exemption from filing their tax returns in case when the income from salary was less than Rs 5 lakh and saving bank interest income was also less than Rs 10,000 for a year. The said exemption was provided on fulfilling prescribed conditions. The exemption was provided only for the assessment years 2011-12 and 2012-13.

 exmption

So what is the NEWS now?

A bad news for all the people falling in the above mentioned category, the honeymoon period is over now with a very recently issued “PRESS NOTE” dated JULY’ 22, 2013 by the CBDT (Central Board of Direct Taxes), where it has withdrawn the said exemption vide a notification. Now CBDT has made it compulsory for all the salaried employees earning upto Rs. 5 lakh p.a. also to file their tax returns on or before the due date of 31st July’.

Why the exemption is not extended to this assessment year?

The earlier exemption was basically provided to reduce the paper work of IT department arising out of manual filing of tax returns. CBDT has been on a drive to encourage electronic filing and implementing radical changes in the system where the online filing of returns has been made very user friendly. Online filed tax returns get processed early and refunds are also issued much quicker than filed through paper form. Hence CBDT has decided to revoke the exemption due to most of the returns being filed online only.

Earlier in May, CBDT vide another notification has also made it compulsory to file tax returns electronically for all the Individuals, including Salaried person earning more than Rs 5 lakh taxable income during the financial year ended March 31, 2013.  Before this notification, filing tax returns online was mandatory only for individuals having a taxable income of more than Rs 10 lakh.

How to file your tax returns now if your income is less than Rs. 5 lakh?

As seen above return has to be filed compulsory online in case your income is more than Rs. 5 lakh. But an option is provided to all the people with an income of less than Rs. 5lakh to file their tax returns either electronically or via physical mode at a special counters set up by IT department.

Conclusion:

I suggest all the taxpayers to file their tax returns electronically even if their income is less than Rs. 5 lakh only for an easy and fast processing. Though the efforts taken up by the CBDT to make taxpayers life easy should be applauded but the recent notification to file returns for earning less than Rs. 5 lakh has come very late and at a time when the last date to file tax returns i.e. 31st July is only a few days away. CBDT should have made this announcement much earlier to avoid last minute running around.

(You can also read this article as originally published in DNA on July 27 2013

http://www.dnaindia.com/pune/1865162/report-know-your-tax-laws-i-don-t-forget-to-claim-rs10000-deduction-under-sec-80tta)

Check your “26AS” before you file Tax Returns this year!

All about form 26AS: Annual Tax credit statement 

What is Form 26AS?

Form 26AS is a consolidated tax statement issued by IT department which shows the tax payments received by the government and credited to your account. All the tax payments made by you or on your behalf either by your employer or any other person should be reflected in your 26AS.

TDS

What it contains?

Tax credit statement 26AS contains the following info:

Part A:    Details of Tax Deducted at Source (TDS)

Part A1:  Details of TDS for 15G/15H

Part A2:  Details of TDS on sale of immovable property

Part B:     Details of Tax Collected at Source (TCS)

Part C:     Details of tax paid like Advance tax, self assessment tax or regular assessment

Part D:     Details of paid Refunds

Part E:     Details of AIR transactions

How is 26AS Tax Credit Statement useful to you?

It is a very useful tool to confirm whether the;-

  •     Tax deducted by the deductor has been duly deposited to the government.
  •    Bank has properly furnished the details of the tax deposited on your account. 
  •   The deductor/collector has correctly filed the TDS/TCS statement giving details of the tax deducted/collected on your behalf;

For e.g. if you are a salaried person and your employer has paid Rs. 2000               00 Tax by way of TDS on your salary and you also have paid self assessment tax say Rs. 20000 on your FD interest then the same should be duly reflected in your 26AS.

Can there be variation in tax credit as shown in 26 AS and your form 16?

 Yes, It may happen due to varied reasons as follows:-

  • Your employer or Deductor/collector has not filed his TDS/TCS statement
  • Your PAN is not provided to the deductor/collector; or incorrect PAN was furnished
  • There was an error by the deductor/collector in quoting your PAN while filing TDS/TCS return
  • Your PAN was not quoted at all.
  • Challan details wrongly quoted either by the deductor or wrongly uploaded by the bank.

What to do in case of variation?

You need to contact your employer/ bank or any a person being the deductor who actually has deducted and deposited tax incorrectly on your account. They need to “Revise” their TDS Return. You need to wait till they revise the same and till it starts showing in your form 26AS. Otherwise, there could be an issue of tax demand notice from IT department.

How to view Form 26AS Online?

 Option 1: By registering yourself at the IT department’s website i.e. www.incometaxindiaefiling.gov.in , this is an instant process and available free of cost.

Option 2: Through the net banking facility provided by your bank;

Option 3: You can also register through NSDL website i.e. https://www.tin-nsdl.com/

Conclusion:

Many taxpayers are receiving income tax notices asking them to pay tax in spite of the same being already paid, so please check your 26AS now and set your tax figures right before you file your tax returns.

Don’t forget to claim Rs. 10,000/- deduction u/s 80TTA while filing your Tax Returns this year!

Claim deduction for your Interest income from all your saving bank accounts

What is Section 80TTA?

Many taxpayers are not aware about section 80TTA under Income Tax Act’1961 which was introduced through Finance Act, 2012. Section 80TTA provides a deduction of Rs. 10,000/- on your income from interest on saving bank accounts.

Who can claim deduction u/s 80TTA?

Deduction u/s 80TTA is applicable to individual taxpayers and HUF only. This benefit is not available to a firm, an Association of Persons or a Body of Individuals.

 

139467701Eligible savings account for claiming deduction!

Saving accounts with any of following entities will qualify:

  • Bank or banking company;
  • Co-operative Society engaged in carrying on the banking business and as specified.
  • Post office Saving Account.

 How does it work?

Interest earned on your savings a/c or FDs has always been taxable under the head “Income from Other Sources”. In order to claim deduction, you have to first include interest income in your total income and then claim deduction u/s 80TTA. For example, if you have received interest of Rs 18,000/- from your saving bank accounts then you have to pay tax on Rs 8000/- only i.e. (18,000-10,000) thus Rs 10,000/- can be claimed as a deduction u/s 80TTA. But if total interest income from all your savings accounts is Rs. 9000/- only, then you don’t need to pay tax at all and the entire amount would be deductible u/s 80TTA.

Is section 80TTA applicable to FD Interest?

No, this deduction is NOT applicable to the interest you received on your FDs/time deposit or term deposit. Term deposit means a deposit received by the bank for a fixed period and can be withdrawn only after the expiry of the predefined fixed period.

For example if you make a 365 days FD for an amount of Rs. 50000/- at an interest rate of say 8%, your entire interest income of Rs. 4000/-(Rs. 50000*8%) would be subject to tax as per your applicable tax slab. You cannot claim deduction of Rs. 4000/- available u/s 80TTA and you need to pay tax on it.

Does no “TDS” means “no need to pay Tax”?

Income Tax Act allows certain deposits & accounts on which no tax is required to be deducted irrespective of any limit for the amount of such interest. Hence there is no TDS on your saving account interest. Regarding FDs, Banks deducts Tax only if your total interest income is more than Rs. 10000/-.

In any case, you have to pay tax on FD or saving account interest as per your tax slab. And as mentioned above you can claim deduction up to Rs. 10000/- with respect to your savings a/c interest.  For e.g. if bank is deducting 10% tax on your FD interest and you fall under the higher slab of say 20% or 30% then you need to pay the balance tax.


(You can also read this article originally published in DNA on July 25 2013

http://www.dnaindia.com/pune/1865162/report-know-your-tax-laws-i-don-t-forget-to-claim-rs10000-deduction-under-sec-80tta)