Of course, you must have done everything legally possible to maximize your freedom from tax. But then, the law permits you only that much.
You might also have wondered about the word return being used for an outgo. Maybe its because governments always want citizens to see things from their point of view, perhaps for the larger good.
Filing tax is compulsory for everyone whose gross total incomethe income under the five heads (salary, business, capital gains, house property or other sources) before allowing for any deductions such as insurance premiumexceeds the basic exemption limit. For financial year 2007-08 (assessment year 2008-09), this limit was Rs1.45 lakh for women below 65 years, Rs1.95 lakh for senior citizens (above age 65) and Rs1.10 lakh for other individuals. It is compulsory for every person exceeding these limits to file the return before the prescribed date, even if their employer has taken care of their liabilities by cutting the tax from their salaries. This is known as tax deducted at source or TDS.
Filling up the form
There are two income-tax return forms, ITR-1 and ITR-2, for salaried individuals. Your sources of income (they will fall under one or more of the five sources mentioned earlier) will decide your form. You will have to submit the filled form to the tax authorities and get an acknowledgement from them. Use ITR-1 to file your tax return if your income is from salary, pension or interest. In the case of any capital gains, income or loss from house property and income from any other source, you will have to use ITR-2. You can go to www.incometaxindia.gov.in/ download_all.asp to download these forms. You will find ITR-1 relatively simple to fill up. A prerequisite for the exercise is Form 16, the certificate that comes from the employer showing the TDS from the income chargeable under the head salary. ITR-1 is almost a replica of Form 16. All you have to do is pick the numbers from Form 16 and put them in the ITR form.
Apart from salary income, there is an important component of income that many taxpayers ignore while filing their returns. It is the interest income earned from funds lying in savings accounts in banks. Disclosing this, however small it may be, is mandatory. You just have to add the total interest credited to your bank account in the last financial year. Scrutinize your income-tax return to ensure that no taxable income is undisclosed. After you file your return, the tax authorities will hand you an acknowledgment. Thats it, you are through with the filing of returns.
You will need to fill up ITR-2 if you, as a salaried individual, have made any capital gains. This form is filled in the same way as ITR-1. In addition, you will have to fill in income, if any, from house property and other sources.
How to file
The actual filing of the return can be done either by using the traditional paper form or electronically, over the Internet. The second, known as e-filing, is fast catching up. The digital method is compulsory for companies, but still optional for salaried individuals. However, it may well become compulsory for individuals with a certain level of income in times to come. So, it may not be a bad idea to familiarize yourself with this process.
Before you start filing the return, check if you would be getting a refund from the I-T department or have to pay tax. In case of the latter, even before starting the filing process, you should first get hold of Form 280, fill it and deposit it in any bank along with the tax payable in cash or cheque. You can also pay tax through Internet banking. In both cases, you will get a receipt number which has to be quoted in the ITR form.
Doing it offline
There are two optionsyou may either submit the ITR form at the nearest income-tax office (ITO) after filling it up yourself, or you may get a chartered accountant (CA) or a tax return preparer to do it for you. Try to visit the ITO well before the last date for filing returnsthe crowd increase as 31 July draws near. You may also take help from the public rela tions officer of the ITO to fill the form. No documents or investment proofs need to be attached with the form, but remember to bring photocopies or originals with you to the ITO. These will come in handy if you are asked to authenticate the math.
The fee of a CA would depend on your income slab and the number of income sources. Typically, it would range from Rs300 to Rs2,000, depending on the complexities involved. One good thing about filing through a CA is that it would bring down the margin of error to nil. Also, depending on the acumen of the CA, which often gets reflected in the quality of his practice, he would suggest some tax-saving ways to you.
Doing it online
E-filing is done through websites authorized by the I-T department to file taxes on your behalf. To e-file, you will have to input the details of Form 16 in the software of the website, which would automatically generate an electronic return in XML format. This format helps in sharing structured data across different information systems. A PDF file of the relevant ITR form is also created along with the XML format. You can download this ITR form, submit it at the ITO and get an acknowledgement.
Save the XML file to your desktop and then upload it on incometaxindiaefiling.gov.in, the I-T department website. Some websites also have provision for online payment of tax. Use of a digital signature (DS) will render the e-filing process complete without involving paperwork and visits to the ITO. In case a DS is used, the acknowledgement will be emailed to you. If you upload the file on the tax departments website without the DS, the ac knowledgement, called ITR-V, emailed to you will have to be submitted at an ITO within 15 days of downloading it. A DS can be acquired from any of the agencies authorized by the government for the job, including the private and government websites meant for filing tax returns.
E-filing is convenientit saves time and can be done from anywhere. What is especially important is that the online method reduces or even eliminates the interface between the tax assessee and tax officials.
The websites
Among the major websites offering e-filing facilities are Taxspanner, Taxsmile and Taxshax. You can either take printouts of the relevant ITRs from these three websites and physically submit them or upload your XML file on the I-T departments website. Taxspanner uploads the taxpayers file directly and emails ITR-V to him. With Taxsmile, you can submit the forms at any of its offices in the country. It will then forward it to the ITO.
All the three websites are secure and easy to navigate. The major difference among them is on two countsthe number of income sources covered and the process. Get clarity on the cost and features offered. The minimum cost package would normally be only for salary income. The advanced version might be required if you have income from other sources. The tax websites also differ in the way they ask for information and allow you to input figures. Taxshax gets most of the figures filled up in a single page. Taxspanner has a step-bystep guide and takes one piece of information on one page. Taxsmile offers both these options.
Use of DS raises the cost of e-filing. The amount of this increase varies across tax websites. A DS can be obtained from Taxsmile for Rs500. Apart from this, you will have to pay for the basic package. Your DS comes with a validity period, after which it has to be renewed. A DS from Taxspanner, for example, is valid for two years. This website offers a deal in which you can file returns for three years at a cost of Rs250 a year.
To get your DS from a tax website, download the relevant form from it, attach the required documents, such as your identity and address proofs, and courier On top of it: A file picture of taxpayers at special counters opened by the I-T department. them to the address concerned. The entire process of acquiring a DS may take around 15 days.
A tax return can also be filed from the government website, incometaxindiaefiling.gov.in/ portal/index.jsp, meant for it. Your PAN (permanent account number) will work as the user name for registering at this website.
Should you go online?
Internet accessibility is growing, but it is still out of reach for many of the 40 million taxpayers. For those who have access to it and want to save time, the digital signature way looks idealyou will be able to file the return in a few minutes from the comfort of your home or office. E-filing without the DS is almost the same as filing returns offline.
Tax laws can often seem like a cross between a Rubiks cube and Muttiah Muralitharans spin bowling. The three private tax websites get around this by making themselves friendly to taxpayers and not making the filing of returns dependent on an intricate understanding of the workings of tax laws. They empower with information and knowledge while taking the taxpayer step-by step through the entire process of tax filing. The details of the return filed get saved in the database of these websites and can be accessed anytime in the future.
If you have any specific doubts concerning the filing process, email the tax website to clear them. Getting clarity is important as some websites do not include things such as income from business or profession, losses of earlier years brought forward or clubbed income. If tax is due, check if you can pay it through the website.
Stick to the deadline
Whether you are going offline or online, make sure your are on the right side of 31 July. If tax is due and the return is not filed till 31 March of the following year, a penalty of Rs5,000 is levied. Penalty may also have to be paid in the form of interest. Check out the answers to some frequently asked questions (FAQs) to get on top of tax returns. And then go ahead and file with a smile.
CHECKLIST
Keep ITR-1, ITR-2 forms handy
Enter all the details in capital letters
Ensure that name, address and other personal details are entered correctly
Double-check PAN numbers, bank account details and the MICR (magnetic ink character recognition) code you write
Store the acknowledgement safely