A complete guide to filing your INCOME TAX return

A complete guide to filing    your  INCOME TAX return



By Vineet Agarwal



Every year we go through the tough task of compiling various documents required for preparing and filing our tax returns. Timely and meticulous planning on your part, however, can make this task easier for you.



After all, filing of tax return is compulsory for everyone whose gross total income exceeds the basic exemption limit, which is Rs 1.90 lakh for women below 65 years of age, Rs 2.40 for senior citizens and Rs 1.60 lakh for any other individual, for the financial year 2009-10 (ie for income earned between April 2009 and March 2010).







Documents to be compiled



Some of us might have already finished our filings and can take it easy for now. For the rest, however, here’s a list of key points to be considered to ensure that tax returns are filed correctly and on time:



1. Due date for filing tax returns: The due date for filing the tax returns for financial year 2009-10 in case of individual tax payers (who generally get salary income) is July 31, 2010. The due date could be September 30, 2010 in case of individuals carrying on business, subject to certain additional conditions.



2. Documents to be compiled: The current tax return doesn’t require any documents to be annexed. However, in order to determine your own income, the following documents will be helpful. These documents will also help if any questioning comes up by the tax officer at a later stage.





Documents to be compiled



Form 16: This is the certificate issued by an employer and helps the individual to know his salary income for the year and tax deducted by the employer.



Form 16A: It’s a certificate issued by banks, companies and other parties providing a summary of interest, rent, commission, professional fees, etc, paid to an individual during the year. Form 16A also provides a summary of tax deducted on such payments.



Bank statements/ passbook: Analysis of statements of accounts operated during the year will help collate / reconcile the details of income received, investments made during the year.



House property details: In case you have income from let out house property, copies of lease deed, details of rent received and receipts of municipal tax paid during year would be required to compute your income. In addition, if you have taken a housing loan, a certificate from the lending bank specifying the principal and interest payment during the year would also be needed to compute the exemptions.



Bills / Contract notes in respect of shares purchased or sold: You may find it comfortable to prepare a statement of sale and corresponding purchases of shares and other investments. This will help in arriving at the correct amount of long term/short term capital gain or loss. Your statement of demat account should help in case of investments made through such account.





Compiling details in respect of 'Annual Information Return'



In case of sale of immoveable property, documents such as sale agreement, documents evidencing the cost of acquisition, period of holding the property, any cost incurred for addition/ improvement to property etc also need to be collated to determine your own income.



Compiling details in respect of ‘Annual Information Return’ (AIR): Every individual is required to report specified transactions as part of the tax return. This involves transactions like:



Cash deposits aggregating to Rs 10 lakh or more in a year;



Credit card payments aggregating to Rs 2 lakh or more;



Payment of Rs 2 lakh or more for purchase of units of mutual fund;



Purchase/ sale of any registered immovable property valued at Rs 30 lakh or more



Payment of Rs 5 lakh or more for acquiring bonds or debentures issued by an Indian company or institution



Payment of Rs 1 lakh or more for acquiring shares issued by an Indian company through a public or rights issue





Purchase of RBI bonds for Rs 5 lakh or more



Details of advance tax payments: Acknowledgement for advance tax paid during the year needs to be compiled for computing the balance tax liability.



Copies of donation receipts: A deduction is available against taxable income in case of donations made to specified charitable and other institutions. Copies of donation receipt shall be required to compute your deduction.



Proof of investment in specified saving schemes/ expenses: Deduction is available in case of investment in PPF, NSC, payment of life insurance premium, etc. Proof of investment/ expense will be help in computing the deduction



Computing your income and taxes



Once the above documents are compiled, the next step is working out the total taxable income or loss under each of the following heads of income:



a) Income from salary



b) Income/ loss from house property



c) Capital gains/ loss from sale of capital assets



d) Income/ loss from business or profession



e) Income from other sources





Set off of current year and prior year's loss



Loss, if any, incurred during the year can be set off against income earned during the year subject to specified provisions.



Similarly, certain losses incurred in previous year are also allowed to be set off against the income of current year.



Previous year’s returns should be referred to ensure that brought forward losses are dealt with appropriately in the current year’s return.





Payment of balance taxes



After adjusting the tax deducted and advance tax, if any, paid during the year, the balance tax liability would need to be deposited as ‘self assessment tax’. It is important to note that in case of delay in deposit of taxes, the self assessment tax shall be deposited along with interest. Self assessment tax can be deposited by filling up the specified form on your on-line banking portal or by issue of cheque.



6. Additional compliances for individuals carrying on business or profession:



Following category of individual taxpayers shall have to get their accounts audited before September 30, 2010:



a) Individuals carrying on business and the total sales, turnover or gross receipts in business exceeds Rs 40 lakh per year; or



b) Individual carrying on profession if the gross receipts in profession exceed Rs 10 lakh in the year.







Determination of correct income-tax return (ITR) form



Once the pending taxes have been paid, the next step is to determine the form which would be applicable to you. In case of Individuals, the tax authorities have come up with four types of forms.



ITR Form Applicability



ITR 1For individuals with income from only salary and interest income



ITR 2For individuals with income from salary, house property, capital gains and other sources



ITR 3For individuals with income as Partner of a Partnership Firm



ITR 4For individuals with income under business or profession



Thus, one needs to know the relevance of each return form and select the right form.





Filing of tax return



The final step is the filing of tax return. Presently, the options available with the individual are:



a) Physically file return with the tax officer; or



b) Electronically file the return by logging on to site www.incometaxindiaefiling.gov.in



In case of electronic filing, an electronic acknowledgment is generated once the tax return is filed. This acknowledgement is required to be printed and a signed copy needs to sent to the Central Processing Unit in Bangalore.



Conclusion: Tax filing is a daunting task, but is also unavoidable. So rather than complaining about the lengthy procedures and paperwork, the best thing is to comply with it well within the time and enjoy a good night’s sleep.



(The author is a Chartered Accountant)



source;economic times