Have you realised how close you are to July 31? It might not seem very close, but there are only a few weeks to go. By then, your income tax returns should be filed for financial year 2008-09.
So, if you or your chartered accountant have not yet started calling up each other about your tax returns, it’s about time you made the first call. It makes no difference whether you are working abroad at the moment: if you have any taxable income in India, it is time to pull up your socks.
Typically, filing tax returns can be boring and complex with the added threat of penalties and harassment if you do not get the maths right. To come out smiling, all you need is a bit of preparation. The government expects you to have paid taxes on whatever you had earned, spent and invested in the last financial year.
And it expects you to have done so on or before the last date for filing returns. All taxpayers need to file back or report any such income or expense details with the government in a prescribed format.
Last year’s Budget had much to offer to salaried taxpayers of the country and helped in saving the tax outgo.
There were two ways in which the taxpayer benefited. One, the threshold level of income tax went up. This means that a greater part of the income comes under the zero tax category. To make the tax pill even sweeter, tax slabs were raised very generously as well.
Earlier, the maximum marginal rate of tax of 30 per cent was applicable from the annual income level of Rs 2.5 lakh (Rs 250,000). This now stands doubled at Rs 5 lakh (Rs 500,000) for the financial year 2008-09. This means that instead of incomes over Rs 2.5 lakh being taxed at 30 per cent, now the part of income that is over Rs 5 lakh will be taxed at 30 per cent.
This means a male taxpayer less than 65 years of age, with a gross income of Rs 5 lakh, will now save about Rs 44,000 in income tax.
But then, how do you file the return? First, identify all your sources of income. You may earn a salary and have capital gains as well, if you are dabbling in shares.
Also, if you have taken a home loan, the head ‘income from house property’ also needs to be accounted for. Therefore, identifying the heads of income is the first step. Then, keep documentary evidence handy for any income, expense or deduction on which you have taken a tax benefit.
Running around to gather them at the last moment is certainly troublesome and should be avoided as much as possible by making the process simpler and less energy consuming.
Next, place the figures under each of the income heads and get your gross total income. From the gross income, reduce any deduction under Section 80 of Income Tax Act.
The gross income that remains is the taxable income on which the tax needs to be paid. Based on who you are — a woman, a senior citizen or ‘other’ — the tax liability would differ.
Computing this could be slightly tedious, but help is available both offline and online. Following this, depending on the income source, choose the appropriate ITR form that needs to be filled up. Finally, choose to go either offline through your neighborhood chartered accountant or online through any of the designated websites.
When it comes to the actual filing, you can easily fill up the form yourself and submit it to the income tax office. If that’s sounding tough, there are three roads to choose — help from a chartered accountant, a tax return preparer (TRP) or through a designated e-filing website. E-filing websites are designed to cut through the maze of difficult tax jargon.
These sites hold the taxpayer’s hand while he files the returns on his own. This makes the process faster and educative. The language of taxation intimidates lay persons, who see it as a complicated subject. In the last 10-15 years, our taxation system has under gone tremendous reforms and the tax structure now is well organised. Each year the base of taxpayers is increasing.
From 3,01,78,000 in 2003-04 to 3,25,00,000 in 2007-08, the number of assessees has increased. If you are a new taxpayer or one who is struggling to obtain a foothold in the world of taxes, our attempt at simplifying the tax filing process seeks to help you sail through this.