Income tax return: Top 5 reasons why you could be paying more tax :EconomicTimes

Although the only certainties in life are death and taxes, have you ever wondered why some people end up paying more tax than their peers?

According to a study conducted by TaxSpanner, the following are the top 5 reasons why you could be paying more tax than your peers:

1. IGNORING HRA EXEMPTION

Tom and Jerry may be getting the same salary, but one of them may outsmart the other.

Both live with their own parents. Tom pays household expenses to his parents on a monthly basis and Jerry simply makes this payment as rent to his parents who (being older) fall into a low income tax slab. And Jerry claims HRA exemption against this.

Moral of the story: Claim your HRA exemption to save tax.

2. NOT CLAIMING MEDICAL INSURANCE PREMIUM DEDUCTION

Given how Tom gets beaten up every now and then, he would have saved a lot of money. How? All he needed to do was to buy himself a mediclaim policy. This way, he lets his insurer bear medical expenses and claims the premium paid for the policy as deduction.

Moral of the story: Get your medical expenses covered by taking the benefit of the medical insurance premium deduction and save tax too.

3. FAILING TO CAPITALIZE ON HOME LOAN TAX BENEFITS

Tom and Jerry came to the City of Dreams together. Both are still trying to make it big.

Tom tries to save every rupee of his salary that he can, hoping that someday he'll be able to buy his dream home. However, property prices in the metro kept him from owning one.

Jerry, on the other hand, makes his dream come true. How?

After making a decent amount of money, he takes a loan and buys a house in his hometown. But that's not all; he also gets a regular rental income out of it and claims home loan tax benefits.

Moral of the story: Capitalize on home loan benefits to save tax.

4. NOT INVESTING IN TAX-SAVING INSTRUMENTS

Tom always wondered why his TDS was more compared to Jerry's, when Jerry and he earned the same salary.

On some probing, Tom found out that while he kept his extra earnings lying idle in the savings account, Jerry invested them in a tax saving fixed deposit.

This way Jerry not only saved a significant amount of tax, but also earned a higher return.

Moral of the story: Save tax by investing in tax saving instruments and benefit from higher return.

5. NOT REPORTING INCOME FROM OTHER SOURCES

Tom and Jerry were making merry. Suddenly, Tom had a reason to worry. The Income Tax Department sent him a notice.

What had happened was that Tom made the mistake of not reporting his income from bank interest. He assumed he did not need to declare this income as the bank had already deducted TDS on it.

The bank had deducted TDS at 10%. However, Tom fell in the 20% income tax slab. Thus, he had to pay tax apart from TDS. The Income Tax Department discovered this on scrutiny and sent Tom a notice, asking for a penalty of 300% of the tax evaded.

Jerry made it a point to report income from all sources, including bank interest, dividends, prize winnings, etc. while filing his tax returns.

Moral of the story: Never skip any sort of income earned from other sources while filing your I-T return.

How to deal with income tax refund delays: EconomicTimes

Delay or non receipt of tax refund is the biggest grievance of many taxpayers. Unintentional error in bank details, delay in processing of paper income tax return (ITR), change in residential address are among the common reasons for the delay.

"Some employees declare the details of the tax exemptions or deductions they are eligible to claim but fail to provide the relevant documentary proof to the employer organisation within the timeframe prescribed by the employer," says Vaibhav Sankla, director, H&R Block India. "Further, deduction on account of donation is not considered by the employer while deducting tax on salary income. This deduction then can be claimed at the time of tax return filing," he adds.

When do you qualify for a refund?

Most companies ask their employers to declare the details of their tax planning at the beginning of the year, but some employees fail to make such declaration and it leads to higher tax deduction, which in turn results in tax refund.

The deduction on interest on housing loan is reflected in the Form 16 based on the provisional certificate obtained from the housing finance company/bank during the financial year. For FY 12, since the interest rates were on the rise, the final certificate would show a higher amount of interest to those who availed of variable rate loans. This too can be one of the reasons for tax refund.

Some individuals pay advance tax on the capital gains they make during the year. In some cases it so happens that they incur some capital loss later in that year. "Or in some cases the tax payer realises that the actual amount of capital gain is less (due to indexation, deductions u/s 54/54EC/54F, incorrect cost calculation etc.) than what he initially computed while paying the advance tax," says Vineet Agarwal, director, KPMG.

E-filing speeds up refund process

The processing time for tax refund is not standardised. It may be processed as early as 20 days or it may take up to two years in some cases. But starting this year, tax experts expect some speedy processing of refunds. This is because of the CBDT circular, which mandates individuals earning an annual income of 10 lakh and above to file their income tax return (ITR) online.

"To get the tax refund without any hassle, it is advisable to file online tax return. The taxpayer should also file Form 30 with the tax officer within two years from the close of the financial year," says Sonu Iyer, tax partner and national leader, human capital mobility services, Ernst & Young.

"When an individual files his/her tax return offline, one has to track the status of the refund by contacting the help desk of SBI at 080-26599760 or contacting the Aaykar Sampark Kendra at 0124 2438000. Alternatively, an individual can follow up, preferably in person, with the assessing officer of the jurisdiction where the return was filed," says Vineet Agarwal.

But this process is very cumbersome. However, if you filed your ITR online, the ITR is processed faster. As a result, it ensures quicker refund payments.

Steps for a faster refund

"In order to ensure a hassle-free and timely refund, you should provide correct details, such as the bank account number and MICR code of the bank branch, in the tax return. This will facilitate direct credit of the tax refund amount in the tax payer's bank account," says Vineet Agarwal.

In case of refund through cheque, one should ensure that along with the account details address mentioned in the return is correct. If you receive a cheque after its expiry, you should approach the concerned tax ward / circle where you have filed your return for re-issue of refund cheque.

Income tax return: Filing tips for first-time taxpayers :EconomicTimes

For most Generation Y professionals, tax is something they would rather not be involved with. These bright youngsters can tackle the toughest corporate challenge but fumble when it comes to their own tax planning. It needn't be like that. Tax planning may appear complicated but once you get the hang of it, it can be empowering and rewarding. Just spend a little time to understand what it is all about and the knowledge will benefit you for the rest of your life. Here are some basics of tax planning. 

Do you have to pay tax? 

That depends on how much you earn and under what heads. Some salary components such as the basic salary, dearness allowance, special allowance and bonuses are taxable. Others such as house rent allowance, conveyance and other reimb ursements are exempt subject to rules. But apart from the income from your employer, you may also earn interest on fixed deposits, bonds and on the balance in your savings bank account. If you invest in stocks or funds, there may be dividend income and ca pital gains as well. If you own property, there may be rental income coming in. 

If the income you earned in a financial year (1 April to 31 March) exceeds the basic exemption limit of Rs 1.8 lakh (Rs 1.9 lakh for females), you have to pay tax on it. From next year, this basic limit will be raised to Rs 2 lakh. The threshold is higher for senior citizens but we won't get into that. 

Tax deduction at source 

Your employer calculates the tax payable and deducts it from your salary. But since tax is payable on th e combined total income, the TDS by your employer may not suffice unless your income from other sources (interest, rent, capital gains, etc) has been factored in. If you changed jobs during the year, you must report the income from the previous employer a s well. If you don't do that, you will end up availing the basic exemption twice in a year, which will lead to a big tax outstanding at the end of the year. 

Before your employer deducts tax, you are asked if you have made any tax saving investments or are eligible for any other deduction or exemption. You can invest up to Rs 1 lakh in any option under Sec 80C. Some of these are automatic-your contribution to the PF, for instance. The other options are PPF, NSCs, tax saving FDs, ELSS mutual funds, life insur ance policies and pension plans. Your choice should be guided by your needs and ability and willingness to take risk. Don't buy an insurance plan if you don't have dependants. Don't jump into equity-based ELSS funds if you can't stomach the risk of stock i nvestments. There are other deductions too. Medical insurance policies for yourself or your parents are eligible for deduction under Sec 80D. If you submitted documentary proof of all these investments to your employer within the stipulated time, the TDS will be low. But if you missed the deadline, you would have paid more tax than was due. 

Do you have to file your return? 

The CBDT has exempted taxpayers with an income of less than Rs 5 lakh from filing their tax return. However, you can avail of this exe mption only if you have income from salary and bank interest. Also, this interest should not exceed Rs 10,000 in a year and you should have paid the tax due on it. You should also not have any tax refund due. 

If you have paid more tax than due, the only way you can get it back is by filing your return. Don't look at filing your tax return as a painful exercise. Instead, think of it as sending a bill to the Income Tax Department demanding a refund of the amount you overpaid in taxes during the previous year . The sooner you do it, the better it is for you because the faster your tax refund reaches you. 

Understanding your Form 16 

Your employer must have given you a Form 16, which is a certificate of the TDS from your salary. For most salaried individuals, th e Form 16 has nearly all the details they need to put in their tax return form. But if they have other investments as well, there could be TDS certificates from the bank or bond issuer on the interest they might have earned. These details need to be fille d in the tax return form. 


A refund is not the only reason to file your tax return. Your return is a declaration of your income and will come handy when you are seeking a loan, buying property, going abroad or even taking a large insurance cover. Banks want to see your income details before they extend a loan. Many countries want to know if you are financially stable before they issue you a visa. Insurance companies want to know if the cover you want is commensurate with your income. The income tax return i s your single sheet answer to all these queries. 

Not filing your return can have serious repercussions. You can be slapped with a penalty of up to `5,000 even though all your taxes are paid. Besides, it will unnecessarily raise suspicion and the income tax department may scrutinise your finances further. 

How to file your return 

You can file your return online or offline, by yourself or with the help of a tax professional. It is advisable to take the help of a tax professional at least for the first time. A chartered accountant will be able to guide you on how to fill up the form and choose the ITR form that is applicable to your case. Once you get the hang of it, you can start filing your return by yourself. Online filing is very simple and doesn't require too much effort. There are websites that guide you at every step of the process. 

They even choose the correct ITR form for you based on your income so there is zero chances of you going wrong. For as little as Rs 200-250, some portals even cross check your return before it is filed to make sure it is error free. It is a small fe e to pay for peace of mind.

Income tax returns: Smart things to know about e-filing :EconomicTimes

1. Tax payers can file income tax returnselectronicallly. E-filing is a quick process and can be done anytime from any place. It can be done through the government portal incometaxindiaefiling.gov.in or any of the private tax websites.

2. The IT department has also appointed intermediaries who provide upload facility for returns through their portals for a fee. However, direct upload on the IT website is free and the service is available 24 hours a day.

3. The tax payers need to fill up the return form offline in the prescribed excel worksheet format. Once the return form is complete, the return must be uploaded on the website in the XML format.

4. Once uploaded, a receipt or the 'ITR-V' will be generated. The tax payer should sign this and send it by post to the Income Tax Department CPC, Bangalore, Karnataka, within 120 days of e-filing.

5. If the tax payer uses a 'digital signature' to authenticate identity on generation of ITR-V, it does not have to be sent to the IT department by post as the process is complete.

6. If the ITR-V is not submitted within 120 days of e-filing, the uploaded return is considered as null and void and the returns have to be filed again.

Inaccurate return can increase tax liability: EconomisTimes

The countdown has begun for filing your income tax return (ITR). It was easier in the previous financial years, when you just handed your Form 16 over to your chartered accountant to file the income tax return on your behalf. The chartered accountant would take care of your paperwork, Form 16, accuracy of the return and hand over the ITR receipt on the completion of the process.

But starting this year, you are required to file tax returns online especially if you are earning an annual salary of Rs 10 lakh or above. The tax portals are very user friendly and decode most of the technical details for the tax payers. However, the onus lies on you to enter every financial detail appropriately and file an accurate tax return.

Generally, due to the inbuilt mechanisms, returns filed electronically would have all the information mandatorily required to be filled in. These would include residential status, gender, TAN of the employer etc.

The ITR would be considered inaccurate if certain details mentioned in the return are wrong or certain details are missing altogether. "The inaccuracies can have financial implications for the tax payer as a particular deduction, tax credit or loss may not be considered by the tax department; and this will enhance the tax liability of the tax payer. At times, there could be penal consequences too," says Vaibhav Sankla, director H&R Block, India.

Common Misses

The most common detail which tax payers forget to mention in their income tax return is the interest income from bank FDs. "Sometimes it could be due to lack of awareness or the delay in the TDS certificate to be given by the banks. Generally, banks give the TDS certificate in February or March every year," says Saakar S Yadav, managing director, myITreturn.com, a tax portal. "Tax payers fill the ITR details as mentioned in the Form 16 and leave out such details which are usually not mentioned in it," he adds.

"Tax payers should refer to tax credit statement in Form 26AS to ensure that their income, TDS and tax payment details are completely reflected in the tax return form," says Vaibhav Sankla.

The second missing element could be claiming deductions/exemptions which the tax payer is entitled to, but are not reflected in the Form 16. "Often employees invest in tax saving instruments after submitting their investment declaration to the employer. In such cases the Form 16 will not have complete details of such investments," says Saakar S Yadav.

Most individuals avail deduction of interest on repayment of home loan. "However, not many are aware that any interest paid on home loan for reconstruction, renewal and repair of the house property is allowed as deduction up to a maximum of Rs 30,000, subject to the overall limit of Rs 1,50,000," says Vineet Agarwal, director, KPMG. Hence before filing the return you should look at every investment and loan and understand the tax treatment for them.

Must Mentions

For Salaried Class

"You have to mention details of your rental income, capital gains or income from other sources (such as bank interest, etc) earned during the corresponding financial year. Moreover, if you qualify as resident and ordinarily resident in India and have overseas assets, the details of the same should be mentioned in appropriate columns in the income tax return," says Sonu Iyer, tax partner & national leader, human capital mobility services, Ernst & Young.

Filing your income tax return, look at CBDT circular first: Economic Times

MUMBAI: With just 17 days left for filing income tax return (ITR), it is time to start the process. However, the CBDT has come out with guidelines on procedural aspects of filing ITR, based on tax payers' annual income. Here is a quick look of changes made by the Central Board of Direct Taxes (CBDT) for this financial year.

1) Tax payers earning Rs 5 lakh per annum

Individuals earning up to Rs 5 lakh annual income are exempted from filing tax returns. However, it is subject to certain conditions.

"The income comprises only of salary (from one employer only) and interest on savings account and interest on savings account does not exceed Rs. 10,000," says Vineet Agarwal, Director, KPMG.

Such interest income should be reported to the employer and the employer should have deducted appropriate amount of income tax. "Hence there will be no additional tax payable by the individual or there is no refund due to the individual," he adds.

2) Individuals in the bracket of Rs 5-10 lakhs

There is no change in guidelines for individuals in this tax bracket. They can filing their tax return in the jurisdictional tax office or electronically.

3) Individuals earning over Rs 10 lakh salaried income

Individuals having gross total income of over Rs. 10 lakhs have to file their return online using any of the tax portals. "Even resident individuals who have assets abroad (including authority to sign a bank account held abroad) are compulsorily required to file their return electronically irrespective of their income bracket," says Vaibhav Sankla, Director-Business Development and Tax Training, H&R Block India.

Tax payers have an option to file their tax return through incometaxindiaefiling.gov.in, tax portal run by the Income Tax Department. You don't have to pay anything to file returns through this portal. There are also several private players who charge anywhere between Rs 180 to Rs 1500 for filing returns online.

Expert advice is not an excuse to avoid penalty for claiming false deductions: I-T tribunal

MUMBAI: An income-tax tribunal has held that a company cannot avoid paying penalty for claiming false deduction on grounds that its claim was supported by advice from a chartered accountant.

A division bench of the Income-tax Appellate Tribunal (ITAT), Kolkata, made this point in an appeal filed by Darwabshaw B Cursetjee Sons, a company based in the city.

The appeal was filed against the levy of a penalty by the tax officer for falsely claiming deduction for an expenditure incurred on voluntary retirement scheme (VRS).

The law stipulates deduction on account of VRS expenditure should be spread over five years, but the taxpayer, on the basis of an opinion given by a CA, claimed deduction in a single year for the entire expenditure.

The I-T department, which reopened the case after detecting the deduction claim, levied a penalty for concealment of income. The taxpayer appealed against the penalty, claiming the error was bonafide since it had acted on the opinion of a chartered accountant. What went against the taxpayer company was the fact that it had claimed only one-fifths of the VRS expenditure as deduction during the preceding year, as was permissible under Section 35 DDA of the Income-tax Act.

"In any case, expert advice obtained by the assessee from Vakharia & Associates lacks credibility, and just because the assessee's claim is supported by a chartered accountant's opinion, this fact per se cannot absolve the assessee from penalty under section 271(1)( c)," the ITAT said.

The tribunal also pointed out that the taxpayer company had followed the relevant law while filing its previous tax return and deducted only one-fifths of the VRS expenditure.

"The expert advice did not deal with this aspect at all. One can perhaps even understand the ignorance about a legal provision, such as of Section 35 DDA, but once the assessee is on record as not only being aware about this provision but also preparing the income-tax return in the light of the said provision, there cannot be justification about the assessee ignoring the mandate of the same provision in the subsequent assessment years," the ITAT held. "It is not correct on the part of the taxpayer to file a return on the basis of a chartered accountant's opinion that is prima facie wrong," TP Ostwal, a senior chartered accountant, told ET.

"The tribunal, on the basis of the facts of the case, held that a claim cannot be said to be disputable if the language of statute is clear and unambiguous and, in such circumstances, the expert's opinion may not be used as a shelter to avoid penalty, as the explanation of the assessee is not bonafide. But, the decision cannot be said to hold the field in all disputable cases where two opinions are valid and, hence, penalty would not be leviable," Vispi T Patel of Vispi T Patel & Associates told ET.

Ready reckoner: How to e-file your tax returns: Economic Times

MUMBAI: With July 31 drawing closer, it's once again time to pore over your documents and ring up your tax consultant. Most individuals prefer to adopt the conventional method and let their chartered accountant handle the cumbersome procedure. However, this year, those with a taxable income of over Rs 10 lakh have no choice but to take the e-filing route. Besides, even others could consider opting for e-filing. It is not as confusing as it is made out to be. If you neither owe any tax nor have any refund to be claimed, you can follow these simple steps to ensure that your returns are filed with minimal hassles:

1. First of all, you need to start by logging on to the website (www.incometaxindiaefiling.gov.in) created by the I-T department for the purpose. If you haven't registered already, you can do so with the help of your PAN. It acts as your user ID in this case.

2. Next, you need to download the appropriate ITR form for individuals listed in the site. Go to the 'Downloads' menu and choose ITR-I (Sahaj), if your only source of income is salary or pension. Those with income from one house property or interest income or can also use this form. Remember, the current assessment year is 2012-13.

3. Now, open the downloaded excel utility.

4. Now, enter all the details asked for. The required information will be available in your Form 16.

5. Next step is to validate the same by hitting the 'Validate' key. An XML sheet will be generated and saved on your computer. The registration process (Step 1) can also be initiated at this stage.

6. You can upload this XML file on to the I-T portal after selecting AY 2012-2013 and the relevant form. You will be asked whether you wish to digitally sign the file. If you have obtained the DS (digital signature), select Yes. Else, choose 'No'.

7. If a message regarding successful e-filing is flashed on your screen, you can consider the process to be complete. Your ITR-Verification form will be mailed to your registered e-mail ID.

8. Now, all you need to do is to get a print-out of the ITR-V (only in blue ink), put your signature and send it by ordinary post to the Income Tax Department-CPC, Post Bag No-1, Electronic City Post Office, Bangalore - 560100, Karnataka within 120 days of filing your returns on-line.

9. It is important to ensure that your tax return reaches this office within 120 days, failing which, you will have to go through the process all over again.

10. If you do not receive an acknowledgement from the I-T Department in due course, you can send the form again. However, don't opt for courier services under any circumstance as it will not be accepted.

Unlock the value of your property; give it on rent and add to income: Economic Times

 Real estate is one of the favourite investment avenuesfor investors with deep pockets.

However, many of them only think about the future value of the property while making the investment, rue investment experts. That is because they don't even want to consider the possibility of renting out the place.

If you want a proof, check the number of permanently locked houses in any new building in big cities.

According to investment advisors, this is a bad strategy, as a real estate investment is expected to fetch capital appreciation as well as rental income to make up for the huge investment and its comparative illiquidity as an investment.

Sure, rental yields are not much; but even at 4-6%, they are good enough to take care of the maintenance costs. The surplus, if any, is the icing.

"With the increase in the cost of property and home loan interest rates, house rents are also going up," says Pankaj Mathpal, CFP, managing director, Optima Money Managers. He is hinting that many prospective buyers are postponing their decision to buy home and instead are settling for living on rent, pushing up rental in many pockets in the suburbs.

"It is a good idea to rent a house than have it locked up. It gives some earnings from the property," he adds. But no amount of financial reasoning is going to convince some of these investors to give their property on rent.