With the financial year drawing to a close, it is time to turn our attention to filing tax returns for the year gone by. After the fiscal year end, you have four months - upto July 31 to file the returns. Yet, many of us wait till the last minute, owing to the human tendency of procrastination and then hope for an extension of the deadline.
However, this year could be different - why not get over and done with your return filing early - perhaps by the end of April itself? Plus, having time on your side means that any inadvertent errors or oversights on account of rushing matters may be avoided.
Besides, the tax return preparation process is really simple. First of all, a taxpayer need not file a tax return unless his or her income is above ~1.8 lakh. For ladies this limit is ~1.9 lakh and for senior citizens (60 years and above), the limit is ~2.5 lakh. A new category of taxpayers was also introduced in the last budget -the very senior citizen (VSC). These are resident individuals who are 80 years or above. Their basic exemption limit has been fixed at ~5 lakh.
In other words, if your total income is below the above mentioned basic exemptions, there is no legal requirement to go through the entire return filing process. Earlier, even if your income was below this threshold, if you were covered under the ambit of what was called the one by six scheme, the tax return had to be filed.
This scheme essentially meant that if you satisfied any one of the various conditions such as owning a telephone connection, a house property, having an electricity bill of over ~50,000 a year and so on, then regardless of the income level, it was obligatory to file a tax return. This is not applicable now and as far as the current year's tax return is concerned, you are required to file only if you have a taxable income above the basic exemption limit.
What is taxable income? :It implies the gross amount of income that you earn before claiming any deductions. For example, say a senior citizen, earns an income of ~3 lakh. During the year, he invests ~70,000 in PPF thereby bringing his income down to ~2.3 lakh. Now, even if ~2.3 lakh is below the basic exemption of ~2.4 lakh, he will have to file his tax return since his gross income of ~3 lakh was above the threshold limit.
Sources of income :Any income earned can be basically categorised under specific heads which are quite exhaustive:
Income from salary
Income from house property
Income from business and profession
Income from capital gains
Income from other sources The tax return filing process can thus be reduced to filling in the details of income at the appropriate place in the tax return. Salaried individuals receive the Form 16 from their employer. The form gives full details and breakup of the salary income. It can be used to fill in the requisite details in the tax return form.
Income from house property implies the rental income of a landlord. Business or professional income is - the net income left after deducting expenses incurred for running the business, subject to tax. Capital gain (short- or long-term) is earned when you sell mutual fund units, shares or property. The last head is the residuary head which basically includes any interest income earned, such as that on fixed deposits, RBI bonds and so on.
An aggregation of all the above incomes should be above the basic exemption limit for you to be liable to pay taxes or to file a tax return. The rate of taxation would depend upon the applicable slab. Of course, interest incomes that are specifically tax exempt (like PPF interest) aren't to be considered in order to arrive at the total taxable income.
Return filing process :Basically, it is all about filling in the correct numbers. The earlier two-page form SARAL, was quite the opposite of its meaning. Along with the income figures, you needed to specify the computations leading to the numbers. This had to be provided by way of a separate annexure. As a result the tax return became quite bulky and complicated. Also, each person attached his own version of the annexures leading to inconsistencies in the tax return even in respect of similar income heads.
Also, SARAL was a one size fits all kind of a solution. This meant that whether you were an employee or a businessman, a senior citizen or a stock trader, the same form had to be used. In the new regime though one is categorised as a specific type of a taxpayer, based on the nature of income earned, simplifying matters.
For most senior citizens, the newly introduced SAHAJ form is required. The forms come with clear instructions for filling it. It is literally as simple as filling in the blanks. The forms are available on the income tax website.
It is advisable to go through these forms and familiarise oneself with them only post March 31. Reason: New forms are introduced each year with minor modifications, if any. These new forms do not require taxpayers to provide any additional information by way of annexures or even attach any additional documents.
Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.
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These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)
Download Tax Saving Mutual Fund Application Forms from all AMCs
Download Tax Saving Mutual Fund Applications
These Application Forms can be used for buying regular mutual funds also
Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )
- HDFC TaxSaver
- ICICI Prudential Tax Plan
- DSP BlackRock Tax Saver Fund
- Birla Sun Life Tax Relief '96
- Reliance Tax Saver (ELSS) Fund
- IDFC Tax Advantage (ELSS) Fund
- SBI Magnum Tax Gain Scheme 1993
- Sundaram Tax Saver
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