Computing your tax liabilities

Heads of Income

Income from Salary All income received as salary under Employer-

Employee relationship is taxed under this head. Employers must withhold tax compulsorily, if income exceeds minimum exemption limit, as Tax Deducted at Source (TDS)

and provide their employees with a Form 16 which shows the tax deductions and net paid income.

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In addition, the Form 16 will contain any other deductions provided from salary such as:

Medical reimbursement: Up to 15,000 per year is tax free if supported by bills. Transport allowance: Up to 800 per month (9,600 per year) is tax free if

provided as transport allowance. No bills are required for this amount. Conveyance allowance: is tax exempt.

Professional taxes: Most states tax employment on a per-professional basis, usually a slabbed amount based on gross income. Such taxes paid are deductible from income tax.

House rent allowance: the least of the following is available as exemption Actual HRA received 50%/40%(metro/non-metro) of basic salary

Income from House property

Income from House property is computed by taking into account what is called Gross Annual Value of the property.

The annual value (Annual value in case of a self occupied house is to be taken as NIL. (However if there is more than one self occupied house then the annual value of the other house/s is taxable.)

Contd..

From this, deduct Municipal Tax paid and you get the Net Annual Value.

From this Net Annual Value, deduct : 30% of Net value as repair cost (This is a mandatory

deduction) No other deduction available Interest paid or payable on a housing loan against

this house

Income from Capital Gains

LTCG : 20% LTCG in case of sell of equity shares:

Nil

STCG Tax: According to slab STCG in case of sell of equity shares:

15%

Income from Other Sources

Income by way of Dividends Income from horse races Income from winning bull races Income from shares (dividend other than

Indian company)

Deduction

Section 80C Deductions Section 80C of the Income Tax Act [1] allows certain investments and expenditure

to be deducted from total income up to the maximum of 1 lac. The total limit under this section is 100,000 ) which can be any combination of the below.₹

Contribution to Provident Fund or Public Provident Fund Payment of life insurance premium Investment in pension Plans Investment in Equity Linked Savings schemes (ELSS) of mutual

funds. Investment in National Savings Certificates Tax saving Fixed Deposits provided by banks for a tenure of 5

years Payments towards principal repayment of housing loans. Also any

registration fee or stamp duty paid. Payments towards tuition fees for children to any school or college

or university or similar institution (Only for 2 children) Post office investments

Section 80CCF: Investment in Infrastructure Bonds

From April, 1 2011, a maximum of 20,000 is ₹deductible under section 80CCF provided that amount is invested in infrastructure bonds. This is in addition to the 100,000 deduction allowed under Section 80C.

Section 80D: Medical Insurance Premiums

Health insurance, popularly known as Mediclaim Policies, provides a deduction of up to 35,000.00 ( 15,000.00 for premium ₹payments towards policies on self, spouse and children and 15,000.00 for premium ₹payment towards non-senior citizen dependent parents or 20,000.00 for premium payment ₹towards senior citizen dependent).

Interest on Housing Loans SectionFor self occupied properties, interest paid on a

housing loan up to Rs 150,000 per year is exempt from tax. This deduction is in addition to the deductions under sections 80C, 80CCF and 80D. However, this is only applicable for a residence constructed within three financial years after the loan is taken and also the loan if taken after April 1, 1999.

Income tax calculation for the year 2012 2013 :You entered : Income = 905730, Gender = female, Seniority = none  Tax for amount above 500000 at rate of 20% is : 81146  Tax for amount above 200000 at rate of 10% is : 30000  Total Tax = 111146

Income tax calculation for previous year (2011 2012) :You entered : Income = 905730, Gender = female, Seniority = none  Tax for amount above 800000 at rate of 30% is : 31719  Tax for amount above 500000 at rate of 20% is : 60000  Tax for amount above 190000 at rate of 10% is : 31000  Total Tax = 122719

Filing of Return

Procedure for depositing tax:A form called Challan available in the Income Tax department, in banks and on the IT department web site should be filled up and deposited in the bank along with the money. Taxes can also be paid on-line.

 Advance tax :It is paid in instalments. The amount payable is to be calculated

in the following manner.For Non corporate:By 15th Jun - NilBy 15th Sep – 30%By 15th Dec – 60%By 15th March – 100%

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Return of Income: It is a prescribed form through which the particulars

of income earned by a person in a financial year and taxes paid on such income is communicated to the Income tax department after the end of the Financial year.

Different forms are prescribed for filing of returns for different Status and Nature of income.

The form can also be downloaded from the site http://www.incometaxindia.gov.in/.

Different forms

ITR1For Individuals having Income from Salary/ Pension/ family pension & Interest

ITR2For Individuals and HUFs not having Income from Business or Profession

ITR3For Individuals/HUFs being partners in firms and not carrying out business or profession under any proprietorship

ITR4For individuals & HUFs having income from a proprietary business or profession

ITR5For firms, AOPs and BOIs

ITR6For Companies other than companies claiming exemption under section 11

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ITR7For persons including companies required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D)

ITR8Return for Fringe Benefits

ITRVWhere the data of the Return of Income/Fringe Benefits in Form ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6 & ITR-8 transmitted electronically without digital signature

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Documents to be enclosed along with the return of incomeThe new return form numbering 1 to 8 is annexure less. Hence no documents need to be attached

 Due dates for filing returns of income/loss

Companies & their Directors 31st October Other business entities, other than companies, if their accounts are auditable & their working partners 31st October In all other case 31st July

E- filing of Returns

Companies and firms are compulsorily required to file their return electronically.

 e-filing is compulsory for the A.Y. 2012-13 onwards, for an individual or a Hindu Undivided Family if the total income exceeded Rs. 10 lakh. 

digital signature is not mandatory. Taxpayers, can also transmit the data in the return electronically, and thereafter submit verification of the return in Form ITR-V.

Benefits of E -filing

E-filing offers convenience of time and place to tax payers.

This facility is available round the clock and returns could be filed from any place in the world.

It also eliminates/ reduces interface between assessee and tax officials.

Procedure of E- filing

Visit ITD e-filing website https://incometaxindiaefiling.gov.in Select appropriate type of Return Form based on Sources of

Income and status of taxpayer. Download the excel based utility from the ITD e-filing website.

Fill your return offline in the downloaded excel sheet and generate a XML file. Register your PAN on the ITD e-filing website, if you are using it for the first time. User id / Login id will be the PAN itself. After successful registration an activation link will be sent to your registered email id. Upon activation you can avail various facilities available on e-filing website including submission of income tax return.

After login, click on "Submit Return". Select the AY and type of form to be uploaded.

Browse to select XML file for uploading in the ITD e-filing website and click on "Upload" button.

On successful upload, acknowledgement details would be displayed. Click on "Download" to download the acknowledgement i.e. ITR-V Form for the taxpayers, who are not using digital signature. This is an acknowledgement cum verification form.

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The tax payer has to print and duly sign the same and send it to "Income Tax Department – CPC, Post Bag No - 1, Electronic City Post Office, Bengaluru - 560100, Karnataka" within 120 days of uploading the return on the ITD e-filing website by ordinary post or speed post only. Upon receipt of the ITR-V, the ITD will send an e-mail acknowledging the receipt of ITR-V to the email id entered in the return form. No Form ITR-V shall be received in any other office of the Income-tax Department or in any other manner. This completes the return filing process for non-digitally signed returns.

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For the taxpayers using digital signature for uploading the form, taxpayer has to register the DSC before uploading the return. In these cases, no ITR-V will be generated. Website will generate "Acknowledgement" instead and return will be treated as filed. Taxpayer may take a printout of the "Acknowledgement" for his/her record.

Can a return be filed after the due date?

Yes. It may be furnished at any time before the expiry of two years from the end of the financial year in which the income was earned.

For example, in case of income earned during FY 2006-07, the belated return can be filed before 31st March 2009.

If I have paid excess tax how and when will it be refunded?

The excess tax can be claimed as refund by filing your income tax return. It will be refunded by issue of cheque or by crediting to your bank account.

The department has been making efforts to settle refund claims within four months from the month of filing return.

Keeping a copy of return

Am I required to keep a copy of the return filed as proof and for how long?

Yes. Since legal proceedings under the income tax act can be initiated up to six years prior to the current financial year, you must maintain such documents at least for this period.

What if you don’t file return

Non-payment of tax attracts interests, penalty and prosecution.

The prosecution can lead to rigorous imprisonment from 6 months to 7 years and fine.

Scrutiny

Based on information available with the department a small percentage of returns are picked up for verification. This process is called scrutiny.

You will be given full opportunity to put forth views and evidences to support your claims.

Recourses

What recourse is available to me if I am unhappy with the order passed by my Assessing officer?

The Income tax Act has provided for filing appeals in such cases. The first appellate authority is the Commissioner (Appeals). Subsequently the matter can be taken to the Income Tax Appellate Tribunal, then to the High Court and Supreme Court.

Exemption from filing returnA salaried employee is not required to file Income Tax Return for

A.Y.2012-13 provided all the following conditions are met:- He has earned only Salary and Income from Saving Bank Account and

the annual interest earned from SB A/c is less than Rs. 10,000/-. His Total Income does not exceed Rs. 5 lacs (Total Income

means Gross Total Income less Deductions under Chapter VIA). He has reported his PAN and interest on Saving Bank Account to his

employer. He has received Form-16 from his employer and his TDS has been

deposited with Central Govt. He has received salary only form One Employer and has No Refund

claim He has not received any notice from Income Tax Department for filing

of Income Tax Returns.

Tax Planning Strategies

Practice tax avoidance. Legitimate methods to reduce your tax obligation to

your fair share but no more. Financial decisions related to purchasing, investing,

and retirement planning are the most heavily affected by tax laws.

Tax Evasion. Illegally not paying all the taxes you owe, such as not

reporting all income.

Tax saving Strategies

Salary Restructuring  Restructuring a few components could reduce your

tax liability.E.g. Opt for food coupons instead of lunch allowances,

as they are exempt from tax up to Rs 60,000 p.a. Include medical allowance, transport allowance,

education allowance, uniform expenses (if any), and telephone expenses as part of salary. Produce bills of actual expenses incurred for these allowances to reduce tax.

Strategies

Utilizing Section 80C Section 80C offers a maximum deduction of up to

Rs. 1, 00,000. Utilize this section to the fullest by investing in any of the available investment options

Options beyond 80C Section 80D – Deduction of Rs. 15,000 for medical insurance of

self, spouse and dependent children and Rs. 20,000 for medical insurance of parents above 65 years.

Section 80CCF- Deduction of Rs 20,000, in addition to the Rs 1 lakh under 80C, for investments in notified infrastructure bonds.

Section 80G- Donations to specified funds or charitable institutions.

House Rent Allowance Are you paying rent, yet not receiving any HRA from your

company? The least of the following could be claimed under Section 80GG.

25% of the total income or, Rs 2,000 per month or, Excess of rent paid over 10% of total income This deduction will however not be allowed, if you, your

spouse or minor child owns a residential accommodation in the location where you reside or perform office duties.

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If HRA forms part of your salary, then the minimum of the following three is available as exemption.

The actual HRA received from your employer The actual rent paid by you for the house,

minus 10% of your salary (this includes basic + dearness allowance, if any)

50% of your basic salary (for a metro) or 40% of your basic salary (for non-metro).

Strategies

Tax Saving from Home Loans Use your home loan efficiently to save more

tax. The principal component of your loan, is included under Section 80c, offering a deduction up to Rs. 1, 00,000.

The interest portion offers a deduction up to Rs. 1, 50,000 separately under Section 24.

Strategies

To minimize taxes owed... If you expect to have the same or a lower tax rate next year,

accelerate deductions into the current year. If you expect to have a lower or the same tax rate next year,

delay the receipt of income until next year. If you expect to have a higher tax rate next year, delay

deductions since they will have a greater benefit. If you expect to have a higher tax rate next year, accelerate

the receipt of income to have it taxed at the current lower rate