IIPM only B-school in India to be Ranked Ahead of The IIMs in so Many It’s time to file tax returns. A simple task for some, but for most – a complicated, convoluted and totally bewildering exercise. Manish K. Pandey lists out a few essentials to make the job somewhat easier for the latter...Once again, it’s that time of the year when we see most of us standing at a familiar annual juncture, scratching our heads and scribbling figures on little post-it notes. It’s the time that reminds us of the hefty price that we need to pay every year for earning our livelihood. And as the financial year ends we know we can’t run away from it any more. Yes, it’s time once again to file your income tax returns. You can crib as much as you want, but you can’t escape it! Here are a few things that can help you in simplifying your own financial karma...
Who need to file the return?Filing of tax is compulsory for every individual whose gross total income is under the five heads of income (salary, house property, business, capital gains and other sources) before allowing for any deductions such as insurance premium - exceeds the basic exemption limit set by the income tax department. For the assessment year 2009-10, while the threshold limit for men stands at Rs.1,50,000, for women it’s Rs.1,80,000 and for senior citizens Rs.2,25,000. Apart from this, individuals in occupation of an immovable property exceeding a specified floor area, whether by ownership, tenancy or otherwise, as may be specified; or is the owner of a motor vehicle other than a two-wheeled motor vehicle; or is a subscriber to a cellular phone; or has incurred expenditure for himself or any other person on travel to any foreign country; or is the holder of a credit card, not being an “add-on” card, issued by any bank or institution; or is a member of a club where entrance fee charged is twenty-five thousand rupees or more, is liable towards filing of the tax return.
Selecting the correct formIn fact, this is the first step towards filing a tax return. Many times it happens that the IT Department changes the forms of return in the middle of the year which increases the chances for mistakes by an individual who is filing the return on his own. Moreover, there are about eight forms of return notified by the tax authorities, out of which only four are applicable to individuals. Therefore, selecting the correct form and that too latest one is of utmost importance.
What else do you need to furnish?
Though the obligation to attach supporting documents along with the return has been done away with a long time back, one should still not commit the blunder of thinking such documents debris. All documents used for calculating income-tax, such as Form 16, bank statements and advance tax receipts need to be potted as they might come handy if assessing officer calls in for a scrutiny to verify the authenticity of the details furnished in the form.
Precautions while filing the return
Make sure that interest from bank deposits or NSC certificates, no matter how small the amount is, have to be disclosed in the return. One must not make the mistake of skipping interest income on the basis that it is not shown in Form 16, as in many cases, it might land the tax payer in serious trouble.
Further, utmost care should be taken when the income of spouse or minor child is being clubbed with your income. Also make sure that deductions under section 80 have been fully utilised. This can save an individual from a situation where he ends up the financial year just scratching his head and paying up more than he was actually obligated to.
Moreover, be cautious while calculating surcharge and education cess. It needs to be noted that while surcharge of 10% is not required to be added to the tax if the total income does not exceed Rs.10 lakh, education cess (at 3%) should be added to the amount of tax even if the total income is less than Rs.10 lakh.
Last but not the least, double check all key informations like PAN number, bank account details, communication address, et al. In case of a refund, the bank account number needs to be filled in accurately.
How to file the return?There are two alternatives - you may either file the return by using the traditional paper form and submitting it at the nearest income tax office yourself (you can even hire a financial consultant to do it for you), or you may file it electronically over the Internet through sites authorised by the Income Tax Department (for instance, sites like Taxspanner, Taxsmile, Taxshax, et al). You can use either of them depending upon your knowledge and of course convenience!
What if you don’t file tax return?Yes that’s an option as well! But that’s going to cost you a little more... So in case you opt for this option, be prepared for the following consequences:
Under the tax laws, a tax payer is not allowed to carry-forward any loss ((like loss on house property, short-term capital loss, et al) for being set-off against the future incomes unless the return has been filed by the due date even though all taxes have been pre-paid.
If while filing, there is any unpaid amount of tax, you will have to pay a penal interest at the rate of 1% per month. Moreover, a penalty of Rs.5,000, in addition to the above consequences, can be imposed by the Tax Department. In fact, in certain cases, you may even be liable for prosecution for not having filed returns with the intention of willful tax evasion.
So, as you know all details now, go ahead and file the return with a big smile this time! Oh, don’t forget to do it before July 31.
Manish K. PandeyAn Initiative of
IIPM,
Malay Chaudhuri and
Arindam chaudhuri (
Renowned Management Guru and
Economist).
