As the month of July approaches, taxpayers are getting ready to file their income tax returns. The procedure for each individual taxpayer is to fill Form 16 and Form No16A (tax deducted on Other Income). To avoid last minute rush one must keep the necessary documents ready, well ahead of the stipulated last date. An individual whose taxable income during a financial year exceeds the exemption limit of Rs 1 lakh (Rs 1.35 lakh in case of females and Rs 1.85 lakh in case of senior citizens) has to file in tax returns.
Which ITR Form is applicable to you?
With the introduction of new income tax return forms based on nature of income earned during the year, one needs to know relevance of each return form and select the right form.
ITR 1: This form can be used only by an individual having a salary and interest income. Form ITR-1 cannot be used if the individual has any income under other heads like:
# Property rental income
# Capital gains
# Dividend income from shares of foreign companies (which is not tax free in India)
# Winning from lotteries or any other prize money
Thus, even under the head “Income from Other Sources”, if the taxpayer has any income other than interest income then he cannot use ITR 1.
On the web site of the IT Department, there are two versions of ITR 1 available for downloading. Version 1 is two pages and Version 2 is three pages, long.
Both versions have additional pages of notes that serve as guidance to the taxpayer, when filling up the form. The font size seems to be the only difference between the two versions though.
It may be noted that this 'Form' is likely to be of use to a very limited number of taxpayers.
Most salaried taxpayers have income from other heads as well as income from sources other than interest (which would be chargeable to tax under the head 'Income from Other Sources'). Therefore, one can only wonder about the actual utility of this form.
Monday, June 11, 2007
Friday, June 1, 2007
File the tax return very easily...!!!
Every person/individual or HUF (Hindu undivided family) - an assessee of any status, as per the Income Tax Act is liable to follow a certain statutory requirements to file a return of income.
It is mandatory for everybody to enter his/her PAN (permanent account number) correctly in the return form. The 'jurisdiction menu' will help you identify your assessing officer.
When total income - from all sources of income - of any person exceeds the maximum amount, which is not chargeable to income tax in any previous year ending on March 31, the person is liable to file the income-tax return.
Let us highlight a few basic income heads and then various steps or the procedure of computing. Heads of income include salaries, income from housing property, profits/gains of business/profession, capital gains, and income from other sources.
Computing procedure
While computing income from the above-mentioned different heads, the procedure is: First, the taxable income from each source is to be computed under each head of income by allowing deductions and then they are aggregated.
For example, in case of an assessee deriving income from his salary and housing property, and also in the form of interest income from a fixed deposit in a bank, firstly, the taxable income under the head 'salaries', then 'income from housing property', and lastly, the taxable income under the head 'income from other sources' for bank interest etc will be computed.
Then all the three incomes under the three heads would be aggregated. From this amount, certain eligible deductions are made to arrive at the net taxable income on which tax is chargeable.
Tax deducted at source
The employer making payment to an assessee earning income from 'salary' deducts a certain amount of tax, from such payment(s) made during the financial year.
Such deduction from the payment is called 'tax deducted at source'. The payment, of TDS, to the government is treated as payment of tax on behalf of the assessee.
Advance tax
In case the assessee does not wish to furnish particulars of his income under other heads to his employer, he has to estimate his total taxable income under the different heads of income during the previous year, and pay tax on it (after excluding the TDS), by the due dates specified under the Income Tax Act. These payments are called 'advance tax payments'. (See Table I)
Table I:
However, the liability for payment of advance tax arises only where the amount of such tax payable by the assesses during that year is Rs 5, 000 or more. Also, any amount paid by way of advance tax on or before the March 31 of that year, is treated as advance tax paid during that financial year.
After the return is prepared and the net taxable income finally determined, it may so happen that, after taking into account the amount of TDS and advance tax, if any, already deducted/paid still some tax or interest (payable for delay in furnishing the return or delay in payment of advance tax) remains to be paid.
This amount should be paid as 'self-assessment tax' before furnishing the return. It is, therefore, important to note that before furnishing the return, the assessee has to pay the entire tax and interest, if payable, and the proof of such tax payments has to be attached with the return. (See Table II)
Table II
Penalty for non-filing of returns
A person who is required to file a return of income compulsorily is liable to a penalty of Rs 5,000 for not filing the return by the end of the assessment year concerned. However, if there is a reasonable cause, penalty may not be levied.
It is mandatory for everybody to enter his/her PAN (permanent account number) correctly in the return form. The 'jurisdiction menu' will help you identify your assessing officer.
When total income - from all sources of income - of any person exceeds the maximum amount, which is not chargeable to income tax in any previous year ending on March 31, the person is liable to file the income-tax return.
Let us highlight a few basic income heads and then various steps or the procedure of computing. Heads of income include salaries, income from housing property, profits/gains of business/profession, capital gains, and income from other sources.
Computing procedure
While computing income from the above-mentioned different heads, the procedure is: First, the taxable income from each source is to be computed under each head of income by allowing deductions and then they are aggregated.
For example, in case of an assessee deriving income from his salary and housing property, and also in the form of interest income from a fixed deposit in a bank, firstly, the taxable income under the head 'salaries', then 'income from housing property', and lastly, the taxable income under the head 'income from other sources' for bank interest etc will be computed.
Then all the three incomes under the three heads would be aggregated. From this amount, certain eligible deductions are made to arrive at the net taxable income on which tax is chargeable.
Tax deducted at source
The employer making payment to an assessee earning income from 'salary' deducts a certain amount of tax, from such payment(s) made during the financial year.
Such deduction from the payment is called 'tax deducted at source'. The payment, of TDS, to the government is treated as payment of tax on behalf of the assessee.
Advance tax
In case the assessee does not wish to furnish particulars of his income under other heads to his employer, he has to estimate his total taxable income under the different heads of income during the previous year, and pay tax on it (after excluding the TDS), by the due dates specified under the Income Tax Act. These payments are called 'advance tax payments'. (See Table I)
Table I:
However, the liability for payment of advance tax arises only where the amount of such tax payable by the assesses during that year is Rs 5, 000 or more. Also, any amount paid by way of advance tax on or before the March 31 of that year, is treated as advance tax paid during that financial year.
After the return is prepared and the net taxable income finally determined, it may so happen that, after taking into account the amount of TDS and advance tax, if any, already deducted/paid still some tax or interest (payable for delay in furnishing the return or delay in payment of advance tax) remains to be paid.
This amount should be paid as 'self-assessment tax' before furnishing the return. It is, therefore, important to note that before furnishing the return, the assessee has to pay the entire tax and interest, if payable, and the proof of such tax payments has to be attached with the return. (See Table II)
Table II
Penalty for non-filing of returns
A person who is required to file a return of income compulsorily is liable to a penalty of Rs 5,000 for not filing the return by the end of the assessment year concerned. However, if there is a reasonable cause, penalty may not be levied.
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