By Shanmuga Prasad, Senior tax professional, People Advisory Services, EY
When I met Rohan yesterday, I was expecting him to be very excited for his trip to Goa next week. But he looked puzzled. On asking, he mentioned that he has to file his tax return for last year (Tax Year 2015-16) and has lots of questions/concerns about it. Rohan has been working with a multinational company and also invests in share market. We discussed on what basic information should be considered/ kept in mind for correctly preparing his tax return:
1. The tax return filing deadline is 31st July 2016. A tax return filed within the due date can be revised later for any mistakes/omissions etc. If you have any losses from house property, capital gains etc which needs to be carried forward, tax return has to be filed by 31st July 2016.
2. Period covered – Income Tax returns cover the period from April 1 to March 31 of next year unlike the calendar year which starts on January 1 and ends on December 31.
3. The tax slab applicable for Individual below 60 Years Of Age is as follows:
The basic exemption limit is Rs 300,000 and Rs 500,000 for individuals aged 60/80 and above respectively.
Education cess of 3% will be levied on the amount of income-tax plus surcharge (Surcharge is levied @ 12% on the amount of income-tax where net income exceeds Rs 1 crore).
Also read: Filing income tax returns: Here’s a quick and easy guide
4. Few of the basic details required for filing a tax return would be PAN, bank account number along with IFSC, address, mobile number and email id. PAN – Permanent Account Number (PAN) is the tax identification number in India and is mandatorily required for tax filing.
5. Identify different sources of income – An important task at hand is to identify different sources of income one has to analyse the taxability of the same. The income can be categorized under the following five heads:
a.i. Income from salary
a.ii. Income from house property
a.iii. Income from capital gains
a.iv. Income from business and profession
a.v. Income from other sources
6. Form 16 and 12BA – is the withholding tax certificate on your salary provided by your employer and forms the basis of your tax return preparation as far as salary income is concerned.
7. Form 26AS – is a consolidated documents of taxes deducted on your behalf and taxes paid by you. This is available on the I-T Department’s website and can be downloaded.
8. Income related documents – Stock trade statements would be required to obtain details of sale/purchase of shares/mutual funds made during the tax year. Bank account statement/Interest certificate would need to be referred to obtain details of interest earned during the tax year as 26AS would only capture details of interest on which taxes have been withheld by the bank.
Investment/Deduction related documents – Housing loan certificate is required to claim interest and principal paid on housing loan availed for purchasing the house property. In case of one self-occupied property, deduction could be claimed upto Rs 200,000 for interest paid during the tax year.
Investments/Contributions made under PPF, NSC, ULIPS, ELSS, qualify for deductions under Section 80C upto a maximum limit of Rs 150,000. This limit also includes contribution made towards EPF through your employer which would automatically get captured in your Form 16.
All of these investments would be captured in your Form 16 if you have provided all the details to your employer.
9. Once collation of details with regard to income and deductions/investments have been done, you need to identify the applicable Income tax return (ITR) form and complete the same. Normally, the following forms are relevant for a salaried individual:
a. ITR1 – Applicable to an individual having income from salary/one house property (not a case of brought forward loss) / other sources (not being lottery winnings and income from race horses).
b. ITR2 – Applicable to Individuals/Hindu Undivided Family (HUF) not having income from business or profession
c. ITR2A -Applicable to an individual/ HUF having more than one house property and not having Income from Business or Profession and Capital Gains and who do not hold foreign assets
10. The tax return would mandatorily required to be E-filed if your income for the year is Rs 500,000 or more. Form ITR-V is the summary document which would be generated by the tax department’s server soon after a return is e-filed (without a digital signature). The ‘V’ stands for verification. The taxpayer is required to verify the summary in the form, print and sign the same and send it to the Centralized Processing Centre of the Income Tax Department by ordinary post or by speed post within 120 days from the date of filing the return. Non-submission of the signed ITR-V form within the prescribed time would make the e-return invalid and the taxpayer would be required to e-file the return afresh. Electronic verification of ITR through internet banking, AADHAR card etc has also been introduced.
After discussing the homework Rohan needed to do before filing his tax return, he realized that the entire process is not at all complicated and completed in time with little planning and awareness.
(Shilpi Malviya of EY also contributed to the article. Views expressed are their personal)