192: How to File Income Tax Return (e-filing)

Posted by Rakesh under FYI, Howto, Uncategorized

Salaried individuals these days can pay most bills online. But what about income tax returns? Salaried individuals and Hindu undivided families (HUFs) can file their tax returns online (also called e-filing).

One of the most important aspect of Income Tax is filing Income Tax return. Individuals with income exceeding the non-taxable income slab, filing of Income Tax Return for the full financial year is mandatory. As we know, Internet and Smartphone technologies change the ways income tax return is conducted. Nowadays there is no need to take the assistance of CA or not needed to be a Chartered Accountant or knowledge of accounts to file Income Tax Returns because now it has become very easier and handy to file Income Tax return.

To cope up with the latest technologies like Internet and Smartphone and changing world, the Income Tax Department of India has launched a convenient, hassle-free and fast online service for filing Tax returns known as e-filing through Internet. It not only saves time but is also more convenient. Individuals can file their Income Tax Returns without any charges by sitting at home or from any place where Internet is available.

Every person or individual whose total income exceeds the maximum amount (i.e. minimum exemption limit) which is not chargeable to the income tax is an assessee, and is taxable at the rate or rates prescribed under the finance act of Govt. of India for the relevant assessment year. So the amount of taxes you owe is based on your annual income.

You must pay taxes throughout the year on a pay-as-you-go system if your total income is likely to be chargeable to tax for the assessment year are required to pay tax in advance during the financial year (April 1 to March 31) on their estimated current income, which will be assessable to tax during the next following financial year called assessment year. The current income for this purpose means the total income which will be chargeable to tax in the relevant assessment year. The advance tax is payable in installments as follows here.

People or individuals who earn more income have higher tax rates than those who earn less, this means tax rates get progressively higher the more you earn. You can reduce your taxes by taking advantage of various tax benefits. Finally, it’s up to you to take control of your tax situation.

First of all, every person, organization, company, or non-profit is subject to the income tax. “Subject to income tax” means that people and organizations must report their income and calculate their tax. Some organizations are exempt from tax. But they still have to file a return, and their tax-exempt status could be revoked if the organization fails to meet certain criteria.

Secondly, you are taxed on your income. That’s the long and the short of it. Income is any money you earn because you worked for it or invested for it. Income includes wages, interest, dividends, profits on your investments, pensions you receive, and so forth. Income does not include gifts. You are not taxed on gifts you receive under Gift Tax Act such as Marriage Gifts, Gifts from Relatives, Gift received under a Will or by way of inheritance. Also, if scholarships, stipends or charities received from a charitable institution would be completely exempt from income tax in the hands of the recipients without any limit provided the trust or institution giving the charity is registered under Section 12AA. Likewise, all gifts under a Will, and all amounts received on the death of a person as a part of the inheritance are fully exempt from income tax.

Thirdly, you must pay your taxes throughout the year. This is called “pay as you go.” For most people, it means your income taxes are taken out of your paycheck and sent directly to the Income Tax of India. At the end of the year, you have paid in a certain amount of taxes. If you paid in more than what you owe, the government refunds the amount over what you owed. This is called a tax refund. If you haven’t paid enough to cover what you owe, then you have a balance due. And you must pay this amount due by March 31st of the following year, or the government will charge you interest and penalties on the amount you haven’t paid in. Legally you are allowed to file your returns before the next assessment year which starts on March 31st, remember to pay up any tax due before July 31st. If you delay beyond March 31st, irrespective of whether you have nil tax to pay or pending taxes, you will be charged a penalty of Rs.5000 along with any penalty payable if any for pending taxes. Failing to file returns you will be levied a penalty in the form of a penal interest of 1% on the existing tax liability. If you delay beyond March 31st, irrespective of whether you have nil tax to pay or pending taxes, you will be charged a penalty of Rs.5000 along with any penalty payable if any for pending taxes.

Fourthly, the Indian Income Tax system is progressive. That means that people who make more money have a higher tax rate, and people who make less money have a lower tax rate. Your tax rate will change depending on how much money you made that year.

Finally, the income tax system is voluntary. That’s because people are free to arrange their financial affairs in such a way to take advantage of any tax benefits. Voluntary does not mean that the tax laws don’t apply to you. Voluntary means you can choose to pay less taxes by managing your finances in a way to minimize your taxes.

How to file an income tax return online in India:

1. Visit Income Tax efiling website (http://incometaxindiaefiling.gov.in) and Register on incometaxindiaefiling.gov.in.

2. Click “Register” under field “New User” to create a user id/password.

3. In Registration page, type your registered ten-digit alphanumeric Permanent Account Number (PAN) in the “PAN*” field as User Id and click “Click Me” button (if you don’t have a PAN then apply online for it at NSDL website.) and enter a password in “Password*” field.

4. Enter your correct Email id as you will be communicated through the Email.

5. After login, click “Select Assessment Year” link under SUBMIT RETURN heading. Select the desired assessment year for which you wish to efile your return

6. Select your applicable ITR number. If you do not have a digital signature, select NO at Digitally sign the file, else select Yes and select the applicable digital signature option. Click “Next” to continue.

7. Browse to select your .xml (efile format) file and click on Upload to eFile your return. A confirmation box will pop up. Click on OK to confirm. You will see the success screen confirming your eFiling.

8. Your ITR-V will be sent to your registered email address. You can also download the same at the success screen. If you have used a digital signature to eFile your return, this is the end of process for eFiling your tax returns. If you have not used a digital signature to eFile your return, take a print out of the ITR-V and sign the same. Send the signed copy of the ITR-V over ordinary post to the following address.

9. Tax Department, CPC, Post Bag # 1, Electronic City Post Office, Bangalore – 560100, Karnataka, India. The signed ITR-V should reach the above address within 30 days of your eFiling the return. Income tax department will send an email acknowledging receipt of ITR-V.

**Documents To Keep Ready**

It is always advisable to keep all the documents required for preparation of the income tax return ready and handy before calculating your tax liability and preparing your tax return. Some common documents required by an individual for preparing the return are:

* Form No. 16 (received from the employer): This will help to know your income from salary and tax deducted by your employer from your salary income.
* Form No. 16A (received from all the payers who have deducted tax): You will first have to get this form collected from the parties who have deducted tax while making payment to you during the year. This includes banks and companies (with whom you have kept fixed deposits), parties to whom you have given loan, tenant to whom you have rented your property, et cetera.
* Balance Sheet and Profit and Loss Account
* Tax Audit Report, if any
* Working of FBT
* Certificate of MAT working (in case of Companies).
* Summary of all bank accounts operated during the year: This summary will give an idea about all the income earned during the year and investments and expenditure incurred. This assures that no part of income is left out and you do not miss out any eligible deductions.
* Summary of all other earnings including Interest on Fixed deposits, Dividends earned etc.
* Copies of all investments made to claim deductions viz LIC Premium Receipts, PPF Copy, Copies of other investments etc.
* Details of property owned during the year: If you have bought some property during the year, you will need details of rent received and receipts of municipal tax paid during the year. In addition to this, if you have taken this property through a loan, do carry the loan details and a copy of certificate of interest paid during the year.
* Sale & purchase bill / documents / contract note in respect of investments / assets sold during the year: You will also need purchase documents corresponding to the sales made during the year. In case of a large number of transactions, it is advisable that you prepare a statement of sale and corresponding purchase of these investments and arrive at the amount of profit or loss, before actually calculating your taxable income.
* Details of tax payments made during the year: This is required only if you have made advance tax payment during the year.

Income Tax Return Forms, also known as ITR ranges from ITR-1 to ITR-8. Each form covers different set of tax payers which include individuals and even the companies so that they can furnish all the informations with respect to the transaction that are posted via annual information returns (AIR).

Income tax return should be filed within the specified period to avoid any penalty. Also, defective returns should be rectified within 15 days from the date of such intimation. Individual should keep in mind to see the heads of Income and decide which type of assessee s/he is and then select the form accordingly. The individual should mention all its sources of income with income amount correctly and should submit the form to the Income tax department or s/he can also submit the form online as the income tax department offers free tax filing on cyber world.

Income Tax Slab Under New Direct Tax Code 2009 applicable for Assessment Year 2010-2011

As per the Finance Act, 2009, income-tax is required to be deducted under Section 192 of the Income-tax Act 1961 from income chargeable under the head “Salaries” for the financial year 2009-2010 (i.e. Assessment Year 2010-2011) at the following rates of Income-Tax (for more detail click here):

A. Normal Rates of tax
-Where the total income does not exceed Rs.1,60,000/-	Nil
-Where the total income exceeds Rs.1,60,000/- but does not exceed amount by which the Rs.3,00,000/-	10 per cent, of the total income exceeds Rs.1,60,000/-.
-Where the total income exceeds Rs.3,00,000/- but does not exceed Rs.5,00,000/-	Rs.14,000/- plus 20 per cent of the amount by which the total income exceeds Rs.3,00,000/-.
-Where the total income exceeds Rs.5,00,000/-	Rs.54,000/- plus 30 per cent of the amount by which the total income exceeds Rs.5,00,000/-.
B. Rates of tax for a woman, resident in India and below sixty-five years of age at any time during the financial year
-Where the total income does not exceed Rs.1,90,000/-	Nil
-Where the total income exceeds Rs.1,90,000/- but does not exceed Rs.3,00,000/-	10 per cent, of the amount by which the total income exceeds Rs.1,90,000/-
-Where the total income exceeds Rs.3,00,000/- but does not exceed Rs.5,00,000/-	Rs. 11,000/- plus 20 per cent of the amount by which the total income exceeds Rs.3,00,000/-.
-Where the total income exceeds Rs.5,00,000/-	Rs.51,000/- plus 30 per cent of the amount by which the total income exceeds Rs.5,00,000/-.
C. Rates of tax for an individual, resident in India and of the age of sixty-five years or more at any time during the financial year
-Where the total income does not exceed Rs.2,40,000/-	Nil
-Where the total income exceeds Rs.2,40,000/- but does not exceed Rs.3,00,000/-	10 per cent, of the amount by which the total income exceeds Rs.2,40,000/-.
-Where the total income exceeds Rs.3,00,000/- but does not exceed Rs.5,00,000/-	Rs.6,000/- plus 20 per cent of the amount by which the total income exceeds Rs.3,00,000/-.
-Where the total income exceeds Rs.5,00,000/-	Rs.46,000/- plus 30 per cent of the amount by which the total income exceeds Rs.5,00,000/-.

Surcharge on Income tax:
There will be no surcharge on income tax payments by individual taxpayers during FY 2009-10 (AY 2010-11).

Education Cess on Income tax:
The amount of income-tax shall be further increased by an additional surcharge (Education Cess on Income Tax) at the rate of two percent of the income-tax.

Deduction in respect of Medical Insurance Premia [Sec. 80D]
Deduction is allowed for any medical insurance premium under an approved scheme of General Insurance. corporation of India, (popularly known as MEDICLAIM) or of any other insurance company, paid by any mode except cash, out of assessee’s taxable income during the previous year, in respect of the following:
Feature
This is an additional deduction after deduction u/s 80C because overall limit on deductions u/s 80C, 80CCC and 80CCD is Rs. 1,00,000. (Sec.80CCE). See below example.

For Whom Deduction u/s 80D is available
(a) In case of an individual- Insurance on the health of the assessee, or wife or husband, or [dependent] parents or dependent children.

(b) In case of an H.U.F.- Insurance on the health of any member of the family.

Amount of Deduction
For A.Y. 2008-09: Maximum Rs.15,000 (Rs.20,000 in case any person insured is a senior citizen).

For A.Y. 2009-10:(1) In case of an individual assessee :
An additional deduction upto Rs. 15000 (Rs. 20,000 in case of the person insured is senior citizen) shall be allowable in respect of medical insurance premium for parent(s) whether or not dependent on the assessee.

Example of Mediclaim deduction

If ‘A’ has paid medical insurance premium (mediclaim) u/s 80D as follows

Deduction u/s 80C for PPF, NSC/LIC	1,20,000/-
Medical Insurance Premium
-For self, wife and dependent children	18,000/-
-For parents (both Senior Citizens)	22,000/-
Total Sum paid by ‘A’	1,60,000/-
Solution: Allowable Deductions
Deduction u/s 80C for PPF, NSC/LIC	1,00,000/-
Medical Insurance Premium
-For self, wife and dependent children	15,000/-
-For parents (both Senior Citizens)	20,000/-
Total Allowable Deduction	1,35,000/-

2) In Case of an H.U.F, the maximum deduction is Rs. 15000 (Rs.20,000 in case any person insured is a senior citizen.)

Mode of Payment (Mediclaim)
Medical insurance premia may be paid by any mode (including by credit card, internet banking) except cash.

Change in Personal income tax slabs for 2010-11

Taxable income (in Rs)	Rate (%)
Up to 160,000	Nil
160,001 – 500,000	10
500,001 – 800,000	20
800,001 upwards	30

Useful links:

1. https://incometaxindiaefiling.gov.in (File Income Tax Returns Online)
2. http://www.incometaxindia.gov.in (National website of the Income Tax Department of India)
3. https://tin.tin.nsdl.com (Apply for your PAN)
4. http://law.incometaxindia.gov.in/TaxmannDit/xtras/taxcalc.aspx – (Compute your Tax Liability) – Official website
5. http://www.computeincometax.com/ – Unofficial website (Calculate your Income Tax for the year 2009 – 10 online) – Unofficial website
6. https://onlineservices.tin.nsdl.com/etaxnew/tdsnontds.jsp (Pay Taxes Online)
7. http://www.incometaxindia.gov.in/archive/BreakingNews_Circular01_Modified_01212010.pdf (Income Tax slab for the Assessment Year 2010-2011)

Related posts:

1. e-filing of I-T returns