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It is that time of the year again when
you have to pay your taxes. For all salaried employees. You have
fifteen days in which to make your tax saving investments. After
that you have to file your tax returns by July 31.
Here is a quick ready reckoner to help
you. If you get stuck somewhere, remember that tax experts are available
online in the coming few days.
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Do I have
to submit a tax return even if I have no taxable income ?
Yes, you do. You will still have to file
a return. Nobody can escape filing a tax return sooner or later.
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Do I have to submit
a tax return even if I am only a salaried employee ?
Yes, you do. It does not matter that you
are a salaried employee whose taxes are fully deducted at source
anyway. You will still have to file a return.
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What happens if I
do not file a tax return ?
Where, as a result of failure to file
the return, the tax evasion exceeds Rs. 1 lakh, the penalty is a
fine and imprisonment that could vary in term between 6 months to
7 years. In other cases, it could be a fine and imprisonment of
3 months to 3 years.
Over and above this, Sec. 271F imposes
a penalty of Rs. 1,000 for late furnishing of returns in normal
cases and Rs. 500 for those which fulfill certain criteria.
Also, if the income under business, profession,
capital gains or house property is a loss, the return must be filed
within the prescribed time limit. Otherwise the benefit of carry
forward of loss is not admissible.
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Where can I obtain a form ?
Ask around in the Accounts Department
(if you have been nice to them, they will get you a form) or simply
click here
to download. If you are a salaried person, you will fill out a form
called Saral and which in official lingo passes as Form 2D. This
form is essentially meant for individuals, more specifically, assessees
other than companies and persons who are claiming exemption under
Section 11.
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Is it just one form or are there many
forms that I need to fill out ?
There is only one form. Saral consists
of 31 items and a basic declaration from you . The form has to be
submitted in duplicate. That means you need to submit two copies
of the same form. The person at the counter will return one of the
copies duly acknowledged. You should preserve this carefully.
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Can I fill out the form on my own or
is it so difficult that I need a consultant ?
The form, Saral, has never been more simple.
Of course it could be simpler but the finance minister cannot be
faulted for not trying. If you are finding it too difficult, log
on to myiris.com and check out for live chats with our panel of
tax experts.
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The form asks for my Permanent Account
Number. What is it ?
It is a number unique you, ten characters
long. Allotted to you by the Income Tax department, it will help
identify you throughout your entire life as an Indian citizen. You
will get a card with your photograph on it with details alongwith
pertaining to you including your Permanent Account Number (PAN),
your date of birth, your father's Name along with your name and
signature.
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If I do not have a PAN number will
I get into trouble if I file a return ?
No. You will get into trouble only if
you do not file a return. You will also get into trouble if you
have not applied for a PAN if you meet any of the criteria that
makes it mandatory for you to have a PAN. It is best that you file
your return and apply for a PAN immediately if you have not done
so already.
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The form asks for my Ward name. How
do I know which one I belong to?
Your office accounts department can help
you find out this information.
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What do I state under the head- Income
from salary ?
Your office accounts department will in
due course give you a document called Form 16. It is basically a
summary of your income from all sources including salaries and the
deductions that you are eligible for. The gross amount of salary
inclusive of taxable value of the perks is to be taken directly
from Form 16. Take care to attach form no.16. Without it the return
would be considered irregular.
Just remember to include the deductions
allowed. There is the ad hoc deduction allowed called Standard deduction,
The Professional tax that you pay is also deductible.
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How do I deal with Income from House
Property ?
Now this gets slightly complicated. What
you are doing with your property will determine the tax treatment.
If you are living in your own home, the tax treatment will be different
from when you are using it for business or a profession.
The owner, or the deemed owner of a house
property, inclusive of the appurtenant land, is taxed on the ‘annual
value’ of the property under the head ‘income from house property’.
Where the house property is used for carrying on any business or
profession, the income is not treated as income from the house property,
but as business income.
The annual value of a self-occupied property
is taken as ‘nil’. Where there are more than one such self-occupied
properties, only one property, as per the choice of the assessee
can be taken at nil value. All others will be treated as let out.
Where the annual value is taken as nil,
all the deductions allowed on let-out property other than the interest
on borrowed capital, are not allowed.
Where there is more than one house or
in the case of let-out property, the ‘gross annual value’ is the
maximum of (i) municipal ratable value (ii) actual rent if the property
is let out and (iii) fair rent. The ‘net annual value’(NAV) is arrived
at by deducting municipal taxes actually paid during the year.
From this NAV, the following deductions
are permitted :
a) One-Fourth of NAV is deductible, for
repairs and rent collection charges irrespective of the actual expenses
incurred.
b)Expenses on (i) Insurance premium (ii)
ground rent (iii) annual charge, not being a capital charge and
not being a voluntarily created one (iv) land revenue (v) irrecoverable
rent and (vi) State tax.
c)In the case of a let out property, vacancy
allowance is deductible if it remains vacant during a part of the
year. The amount deductible is that part of the NAV (not annual
rent) on a pro-rata basis. This deduction is however not admissible
if the property remains vacant throughout the fiscal year. It has
to be let out for some part of the year, even for one day.
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What about deductibility of interest
on housing loans ?
If the property has been acquired, constructed,
repaired, renewed or reconstructed with borrowed capital, the interest
payable is deductible. In the case of let out properties, the entire
interest payable can be set off. In the case of self-occupied property
interest is deductible up to Rs. 75,000 but only on capital borrowed
after 1.4.99 and if the acquisition or construction of the property
is completed before 1.4.2001. This terminal date has been raised
to 1.4.2003 and the amount of interest deductible to Rs. 1,00,000
by the last Finance Act. The 2001-02 budget raises this deduction
further to Rs. 1,50,000.
Then again, this relief is allowed only
when the income from house property becomes chargeable to tax. In
other words, the construction should be complete, the flat should
be ready for occupation and the municipal annual value is known.
Take care to disclose the address of the
property, its nature - whether let out or self occupied, and the
computation of net income by way of a separate annexure.
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I have a side business. How do
I deal with this ?
This is fairly straight forward. Remember
to attach annexures stating the computation of income from the business
or profession, the profit and loss account, balance sheet with the
relevant enclosures, including auditor's certificate along with
the return. Take care to suitably modify and adjust any disallowable
expenses, claims, brought forward losses,depreciation etc., if any,
to arrive at the accurate taxable profit or deductible loss if any.
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What is the treatment of capital gains
?
Though only the net amount
of capital gain is to be shown in the form, the calculation thereof
and the details such as the description of the transferred asset,
its cost of acquisition, the date of acquisition, date of transfer,
value of consideration, adjustment of brought forward losses if
any, etc., should be indicated in a separate annexure.
Also, short-term and long-term gains have
to be seperately classified. A short-term asset is one which is
held for 36 months or less immediately preceeding the date of transfer.
Assets held for more than 3 years are consequently long-term. However,
equity shares, units of UTI/MFs and listed scrips, bonds, debentures
etc. are considered as long-term assets if held for more than 12
months.
For computation of long-term capital gains,
the assessee has two options.The first one is to calculate the difference
between the cost of acquisation and the sale price and tax the same
at a flat rate of 10%.The other option requires the assessee to
pay tax @20%. However, in that case, the cost of the asset sold
can be adjusted for inflation. Starting with the base year as FY
81-82, the RBI notifies the ‘Cost Inflation Index’ every year as
given in the following table.
Table-1 : Cost Inflation
Index
|
Financial
Year
|
Inflation
index
|
Financial
Year
|
Inflation
index
|
|
1981-82
|
100
|
1991-92
|
199
|
|
1982-83
|
109
|
1992-93
|
223
|
|
1983-84
|
116
|
1993-94
|
244
|
|
1984-85
|
125
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1994-95
|
259
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|
1985-86
|
133
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1995-96
|
281
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|
1986-87
|
140
|
1996-97
|
305
|
|
1987-88
|
150
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1997-98
|
331
|
|
1988-89
|
161
|
1998-99
|
351
|
|
1989-90
|
172
|
1999-00
|
389
|
|
1990-91
|
182
|
2000-01 |
406 |
Short-term capital gains has the nature
of normal income. Hence is added to normal income for calculation
of tax. However, long-term capital gains are taken as a separate
block and charged to tax at a flat rate of 20%. On this, the assessee
does not get any deduction u/s 80L, 80D etc., or the rebate u/s
88. However, tax rebate u/s 88B for senior citizens is certainly
applicable.
The dates 15th September, 15th December,
15th March are basically the deadlines for payment of advance tax
payable ((discussed subsequently) in relation to capital gains.
Therefore, gains arising in each period should be separately indicated
in the given space.
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What do I report under the head
"income of any other person" ?
Certain actions of assessees give
rise to the clubbing provisions of the Act. For example, income
from investment gifted to spouse or minor children has to be included
and taxed in the assessee’s own hands. Any such items have to be
clearly stated and shown here.
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What do they mean by income from
other sources ?
Net income from other sources such as
interest, income from UTI/MFs, interest on bank FDs etc. is what
the tax man has in mind. Even though the most common income sources
such as dividends from shares and MFs or even UTI are completely
exempt from tax, it is still necessary to lay out details of such
incomes in a separate annexure to be attached with the return.
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What are the deductions under chapter
VI-A referred to in the form ?
Some of the more relevant deductions applicable
to the common person in daily life, subject to the proviso that
the aggregate amount of deductions should not, in any case, exceed
the gross total income, are as follows.
Mediclaim : Sec. 80D
Deduction upto Rs. 10,000 is allowed in
respect of medical insurance premiums paid by cheque by an individual
to benefit the assessee and dependent family including spouse, children,
and parents. The same benefit is also available to an HUF for its
members. For senior citizens, the deduction is raised to Rs. 15,000.
However, premiums paid by senior citizens for covering health of
their children, dependent or otherwise, are not eligible for the
deduction.
Handicapped Dependent : Sec. 80DD
Following the merger of Sec. 80DDA with
80DD, the total deductible amount was raised from Rs. 35,000 to
Rs. 40,000. Sec. 80DD stipulated that a resident individual or a
member of HUF having a dependent relative who suffers from a permanent
physical disability (including blindness) or mental retardation
was entitled to a deduction of Rs. 20,000 in a year for medical
treatment, training or rehabilitation.Payment to LIC’s ‘Jeevan Aadhar’
and UTI’s ‘Special Plan for the Handicapped’ specially designed
for such persons was covered by Sec. 80DDA, offering a deduction
of Rs. 15,000. Deduction under section 80DD is statutory in nature
and is allowed in full, irrespective of the actual expenditure incurred
on medical treatment.
Treatment of protracted diseases: Sec.
80DDB
Exemption of Rs. 40,000 is allowed for
expenditure on treatment of protracted diseases (spelled out) to
an individual for herself or a dependent relative and to an HUF
for any of its members. For senior citizen, this limit would be
Rs. 60,000. However, any amount received by way of medical insurance
has to be subtracted for arriving at the eligible deduction.
Loan for Higher Education : Sec. 80E
Repayment of loan as well as interest
thereon by an individual taken from a bank, a notified financial
institution or any approved charitable institution for higher education
is deductible upto a ceiling of Rs. 25,000 (raised to Rs. 40,000
this last time around) per year for 8 successive years. Loans given
by employers are not eligible. Higher education means studies for
any graduate or post graduate course in engineering, medicine or
management or a post- graduate course in applied or pure sciences,
including mathematics and statistics.
Donations : Sec. 80G
An assessee is entitled to a deduction
of 50% (and in some cases 100%) of donations made for approved charitable
purposes. These donations must be in the form of money and not in
kind, unless the donor is the manufacturer of the items donated.
Some of these funds have an aggregate ceiling of 10% of gross total
income, as reduced by the standard deduction under Section 16(i)
as well as professional tax under Section 16(iii) and also by other
permissible deductions under Chapter VI-A.
Accommodation expenses: Sec. 80GG
All assessees, including employees not
getting HRA, paying rent for furnished or unfurnished accommodation
in excess of 10% of their total income are entitled to a deduction
of least of i) rent in excess of 10% of total income; ii) 25% of
total income and iii) Rs. 2,000 per month. The deduction is not
available if the accommodation is i) owned by the assessee or his
spouse or minor child or the HUF of which he is a member at the
place where he normally resides or has her office, employment, business
or profession or ii) owned by him at any other place and occupied
by him. The assessee is required to file a declaration in Form-10BA.
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How do I then compute total income
?
. The ‘total income’ means income arrived
at after giving effect to all the deductions but before this particular
deduction. Most of the deductions having a ceiling have similar
stipulations.
Interest and Dividend : Sec. 80L
Aggregate earnings from some specified
sources are eligible for deduction upto of Rs. 15,000 from the taxable
income out of which Rs. 3,000 was specially earmarked for government
securities and UTI/MFs. However, now that UTI/MF(on equity schemes)
income has become tax-free and since individuals do not normally
go in for government securities, this special limit often goes unutilised.
The schemes are :
* Deposits with a) Banking Company or
Co-operative Banks b) Co-operative Societies c) Approved financial
corporations or public companies to provide long-term finance for
industrial or agricultural development or for construction or purchase
of residential houses; (the ‘Home Loan Account Scheme’ of National
Housing Bank is not covered by Sec. 80L but it enjoys the benefit
of tax rebate u/s 88), d) Industrial Development Bank of India and
e) Housing Boards.
* Small Savings Schemes —- a) National
Savings Certificates VIIIth issue b) Post Office Time and Recurring
Deposits c) National Savings Scheme, 1992 and d) Post Office Monthly
Income Scheme.
* Notified debentures of co-operative
societies or institutions or public sector companies.
Physically Handicapped Person : Sec.
80U
A resident, who, at the end of the previous
year, suffered from a permanent physical disability (including blindness)
or was mentally retarded, which had the effect of reducing substantially
her capacity to engage in gainful employment or occupation is entitled
to an ad hoc deduction of Rs. 40,000. This deduction can be claimed,
irrespective of the expenditure on the treatment or the duration
of the disability. All that is required is to furnish a certificate,
procured from practitioners working in government hospitals or specified
associations for handicapped persons, in support of the claim in
the first year for which the deduction is claimed.
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What are tax rebates and how do I claim
them ?
Rebate is a deduction from tax payable.
Since these are the best tax-slashing devices, it is absolutely
essential to have a clear, concise and complete insight into these.
Tax Rebate under section 88
Contributions out of income chargeable
to income tax by an individual or HUF to some specific schemes (see
Table) qualify for deductions from tax payable at a flat rate of
20% of the contributions made. The aggregate contribution to all
these schemes qualifying for deduction is subject to a ceiling of
Rs. 60,000.
Schemes Eligible for Rebate u/s 88
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Savings Scheme
|
Maximum Limit
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1
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Life Insurance Premiums
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No limit
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2.
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Recognised Provident Fund
|
No limit
|
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3.
|
Family Pension Scheme
|
Within prescribed limits
|
|
4.
|
16-yr Public Provident Fund
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Rs. 60,000 p.a.
|
|
5.
|
10/15-yr Unit Linked Insurance Plan
|
Rs. 75,000 target amount
|
|
6.
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10/15-yr Dhanaraksha
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Rs. 75,000 target amount
|
|
7.
|
National Savings Certificate - VIII
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No limit
|
|
8.
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National Housing Bank
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No limit
|
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9.
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National Savings Scheme-92
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No limit
|
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10.
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Jeevan Dhara/Jeevan Akshay of LIC
|
No limit
|
|
11.
|
Equity-Linked Tax-Saving Schemes
|
Rs. 10,000
|
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12.
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Retirement Benefit Plan of UTI
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No Limit
|
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Instruments of Infrastructure Companies
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Each of these schemes attract an extra ceiling
of Rs. 10,000.
|
| |
Units of MFs Dedicated to Infrastructure
|
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FI Bonds Dedicated to Infrastructure
|
For an individual who is an author, playwright,
artist, musician, actor, sportsman or athlete, the qualifying ceiling
is higher at Rs. 70,000 and so is the rate of tax rebate at 25%.
The only condition for applicability of the extra concession is
that the income from profession should be more than 25% of his total
income. Here, capital gain is taken as a part and parcel of the
total income inspite of treating it as a separate block of income.
Sec. 88 and House Property
Any payment made by an individual or HUF
towards cost of purchase or construction of a residential house,
(not necessarily self-occupied) qualifies for the deduction up to
Rs. 10,000 (raised to Rs. 20,000 in the latest budget) subject to
the overall monetary limit of Rs. 60,000.
Such a house is required to be held for
a minimum period of 5 years from the end of the financial year in
which its possession was taken. If the house is sold earlier, aggregate
rebate claimed shall be added to the tax liability on normal income
of the assessee for the year during which the house is sold.
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How is agricultural income treated
?
Agricultural income is not taxable. However,
where an assessee has other income, it will be aggregated only for
the rate purpose.
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What then is the tax on total income
?
How much do you actually pay? The surcharge
@12% on tax computed after taking into account deductions and rebates
will be levied if the net total income is over Rs. 60,000. For income
over Rs. 1,50,000 p.a., the rate of surcharge is 17% on the top
rate of 30%. Marginal relief would be provided to ensure that the
total tax payable along with the surcharge, on excess of income
over Rs. 60,000 is limited to the amount by which the income exceeds
Rs. 60,000.
No surcharge is payable by NRIs.
Surcharge is applicable to i) normal tax
ii) advance tax iii) tax on long-term capital gains iv) Tax Deduction
at Source (TDS) and v) the dividend tax payable directly to the
exchequer before dividend is paid by the companies to their shareholders
and by the MFs to their unitholders.
Income Tax Rates - Individuals & HUFs
|
Net Taxable Income Slab Rs.
|
Tax at Minimum Rs.
|
Marginal Rate % *
|
|
Under 50,000
|
Nil
|
Nil
|
|
50,000 - 60,000
|
Nil
|
10
|
|
60,000 - 1,50,000
|
1,000
|
20
|
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Over 1,50,000
|
19,000
|
30
|
*Plus Surcharge
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Have I paid advance tax ?
If you have followed the rules, you have.
All taxpayers are required to pay advance tax in spite of the fact
that most income is subject to TDS or is tax-free.
If the tax payable for the year is Rs.
5,000 or more, advance tax is payable in 3 instalments during each
financial year as follows :
On or before 15th September : 30% of estimated
tax.
15th December : 60% less tax already paid.
15th March : 100% less tax already paid.
In the case of shortfalls of the first
two instalments of advance tax, simple interest @1.5% per month
is charged for 3 months (when the next instalment falls due) on
the amount of shortfall of 30% or 60%. Even if the delay is just
by one single day, the interest is payable for 3 months.
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But what if I had unanticipated income
and capital gains ?
In this case, you are forgiven. Accordingly,
no interest would be charged in respect of any income, which was
neither anticipated nor contemplated, received after the date of
first or subsequent installment of advance tax. However, it would
be necessary to pay advance tax on such income at the next due date
for advance tax.
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