How to file Income Tax Returns in India ?

“HAVE YOU FILED YOUR INCOME TAX RETURNS?”:-
This is a common question asked in India during July every year, as 31st July 2010 is the last date for filing “Income Tax Returns”. Why we have to file Income Tax Returns?:-

If we do not file our ‘Tax Returns’ in time:-

  • we will not be able to revise the returns and
  • we will not be eligible for any refunds.

Do we have to file the Returns?:-

The first step in filing tax returns is to find out whether we have to file our tax returns or not. If our gross taxable income before deductions exceeded the threshold limit in 2009-10, we have to file returns.

If all our taxes for 2009-10 are paid in full and there is no refund due from the I-T department, there is no need to file our tax return immediately. We can file the returns at any time before the end of the assessment year.

How to calculate Income Tax?:-

We must know what is our ‘income’ and what is our ‘taxable income’ and what is the ‘rate of tax’ payable by us. We must find our taxable income correctly and calculate the tax payable correctly.

We have to add up our incomes from different sources and subtract various tax deductions available and find out the “Net Taxable Income”.

We have to calculate the Income Tax payable on the net taxable income as per the rates of income tax depending on various slabs. The rates/slabs of Income Tax for Individuals are as given below:-

Income Tax Rates/Slabs for the Financial Year 2009-2010/
Assessment Year 2010-2011:-

For Individuals & HUF’s (except:-1. individual women resident of India and below the age of 65 years at any time during the previous year and 2. individual residents of the age of 65 years or more at any time during the previous year- for which the rates/slabs are given separately) :-

  • If the total income is below Rs.1,60,00/-:-NIL
  • If the total income is from Rs.1,60,000/- up to Rs.3,00,000/-:- 10% of amount by which the total income exceeds Rs. 1,60,000/-
  • If the total income is from Rs.3,00,000/- up to Rs.5,00,000/-:- Rs. 14,000/- + 20% of the amount by which the total income exceeds Rs.3,00,000/-
  • If the total income is above Rs.5,00,000/-:- Rs. 54,000/- + 30% of the amount by which the total income exceed Rs.5,00,000/-

For individual women residents of India, below the age of 65 years at any time during the previous year:-

  • If the total income is below Rs.1,90,000/-:-NIL
  • If the total income is from Rs.1,90,000/- up to Rs.3,00,000/-:-10% of the amount by which the total income exceeds Rs.1,90,000/-
  • If the total income is from Rs.3,00,000/- up to Rs.5,00,000/-:- Rs. 11,000- + 20% of the amount by which the total income exceeds Rs.3,00,000/-
  • If the total income is above Rs.5,00,000/-:- Rs.51,000/- + 30% of the amount by which the total income exceeds Rs.5,00,000/-

For individuals(both men and women) of the age of 65 years and more at any time during the previous year:-

  • If the total income is below Rs.2,40,000/-:-NIL
  • If the total income is from Rs.2,40,000/- upto Rs.3,00,000/-:- 10% of the amount by which the total income exceeds Rs.2,40,000/-
  • If the total income is from Rs.3,00,000/- upto Rs.5,00,000/-:- Rs.6,000/- + 20% of the amount by which the total income exceeds Rs.3,00,000/-.
  • If the total income is above Rs.5,00,000/-:- Rs.46,000/- + 30% of the amount by which the total income exceeds Rs.5,00,000/-

(Surcharge: upto Rs 1 Crore :NIL& Education Cess: 3% on the Income-tax payable.)

How to fill in the Income Tax Returns Forms?:-

The only major variations in the July 2009 tax returns and the July 2010 tax returns are the introduction of the Saral-II(or ITR1) form and the broadening of its applicability.

The two-page Saral-II is not different from the ITR1 used till last year. Only difference is that till last year, those who had rental income from a house or capital gains had to use ITR2. Now, those who have income from only one house or tax-free capital gains can use the Saral-II form.

We must give the details of our Bank Account, namely:-

  • Bank Account Number,
  • The nine digit magnetic ink character recognition (MICR) code, which identifies our bank and branch.

correctly to receive “Income Tax Refunds” in time.

We must avoid the following Common Mistakes in filing our ‘Tax Returns’:-

Incorrect IT- PAN:-

If we furnish our 10- digit alphanumeric PAN wrongly in our tax returns, we may be penalized with a fine of Rs 10,000 for the slip-up.

Incomplete AIR:-

The following are supposed to inform the Income Tax Department about their clients transactions above some limits:-

  • Mutual funds,
  • insurance firms,
  • brokerages,
  • credit card issuers and
  • banks.

Their reports and our disclosures must match. So, we must mention large transactions, above the limit, in the above in our Annual Information Return (AIR).

Double Deduction:-

If we changed our jobs during the year and got deduction from both employers, we must not claim the double deduction in our returns. To avoid this we must inform our new employer about the deductions made in the previous income/s. We have to recalculate the taxable income correctly and pay the outstanding tax along with one per cent interest for every month of delay.

Treatinf TDS as Tax:-

For several types of income, tax is deducted at source. The TDS is about 10 per cent of the income and the tax payable by the individual could be much higher at 30 per cent. So, TDS is only a provisional deduction. We must add such incomes to our total annual income to find out how much more tax we have to pay.

Ignoring Tax-free Income :-

Some types of income are exempt from tax, including:-

  • agricultural income,
  • interest earned on EPF and PPF,
  • long-term gains from equities,
  • income from insurance policies, dividends,
  • commuted amount of pension and
  • compensation received under some acts.

We have to report such tax-free incomes in our returns.

Income Tax Returns e-filing Portals:-
To avoid making mistakes in our tax return, we may use the services of an e-filing portal. These sites will calculate our tax, help us to fill in the form and file our returns.

We need not attach any document with the new ‘tax returns’, but we must have them ready to fill the returns correctly.

If we have income from salary, pension and interest, we need Form 16 and the interest details.

If we have other sources of income, we will need details about:-

  • rent received,
  • dividends,
  • capital gains,
  • deductible expenses, etc.

To fill the annual information return section in the tax return form, we need:-

  • our bank account/s statement/s,
  • credit card/s statement/s and
  • mutual fund/s statement/s
  • details of bank fixed deposit receipts and
  • details of purchase of immovable property.

Status of Income Tax Refunds:-

We can now check up the status of our ‘tax refunds’ online, by the following steps:-

  • Log on to “incometaxindia.gov.in”,
  • Click on ‘status of tax refund’ on the home page,
  • Key in our IT PAN,
  • Choose the relevant financial year.

“ASK” for Tax Refunds:-

To attend to the grievances of the tax-payers, “Aayakar Sewa Kendra” (Ask)’s have been established last year at the following centres:-

  • Pune,
  • Kochi and
  • Chandigarh.

This year some more “ask” units will be set up at various centres.

For any problems in /queries about getting ‘tax refunds’ we can send e-mail to the Directorate of Income Tax at :- “ask@ incometaxindia. gov. in” and the I-T officials will scrutinise the complaint and redress it in a time-bound manner.

We will come to know whether our ‘tax refund’ is sent to us or whether there is any problem in the refund.

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