Thursday, July 17, 2008

10 important things to do before filing I-T returns

It is that time of the year again when tax payers - particularly the salaried class - scramble to file I-T (income tax) returns.After all, filing of tax return is compulsory for everyone whose gross total income exceeds the basic exemption limit.For financial year 2007-08 (assessment year 2008-09), for instance, this limit was Rs 1.45 lakh for women below 65 years of age, Rs 1.95 for senior citizens and Rs 1.10 lakh for any other individual. If your income for the year exceeded the exemption limit, you will be required to file the return by the due date (July 31, in this case).However, despite all the precautions taken by you, rush-hour filing may mean that you could inadvertently miss out on certain details and disclosures, and therefore be on the bad books of the taxman.If not that, you might just forget to make the most of the tax breaks available to you, thus paying more tax in the process and claiming no or less return. Here are 10 important things to do before filing your I-T returns:
1. Choose the right form:
The first thing to do is to see that you have chosen the right form to file your return. For example, there are two I-T return forms -- ITR-1 and ITR-2 - available for salaried individuals at the moment, and your sources of income will decide which form to use.Use the first form if your income is from salary, pension or interest, and use the second one in case of any capital gain, income or loss from house property and income from any other source.The Tax Department will refuse to accept your form in case you have chosen the wrong form.
2. Fill in correct personal details:
Ensure that you fill in correct personal details in the form meant for you, especially your name, address, bank account details and PAN number.Bank account details include the bank account number, type of account and the bank’s MICR code. This is crucial, especially if you are claiming a refund.Likewise, your PAN is very important because the tax laws levy a fine of Rs 10,000 for not quoting or misquoting your PAN number.
3. Attach Form -16:
Check that you have already received your Form -16, i.e. certificate of tax deducted at source by the employer on your salary income. The original Form-16 will have to be deposited with the I-T return form.Similarly, "if any tax has been deducted by bank on interest or any other party on the payment made to you, then you will have to obtain Form -16A, i.e. certificate of tax deducted at source on rent, interest etc," informs Vikas Vassal, executive director, KPMG.
4. Analyze your bank statement:
Ensure that you have analyzed your bank statement as to any income received or any investments made, that are required to be disclosed in your tax return."A common mistake most salaried tax payers tend to commit is the exclusion of interest income. Your assessing officer doesn’t have to a genius to guess that any person who maintains a savings/deposit account would normally also receive interest income and not disclosing the same may.Therefore, be one sure way to get discomforting correspondence from the tax office," says R K Chopra, V-P (Finance), Alankit Assignmets Ltd.
5. Compute your tax liability:
Ensure that you have computed your tax liability, including your salary income, and "if any tax is payable, the same has been paid as ‘self assessment tax’ before filing the tax return.Further, if any interest is payable for late payment of tax, then the same has also been deposited," says Vassal.
6. Fill in income details:
Check whether you have correctly filled in details of your salary income/other income and also the tax deducted at source in the relevant columns of the tax return form to ensure that you get the credit for TDS.
7. Income from stocks:
Don’t miss on the details of your stints with stocks last year.Note that even if the markets haven’t been kind, the loss would be allowed for carry forward for luckier times in future for setoff only if the same has been appropriately been disclosed in the form.
8. Claim all deductions:
Ensure that you have, under various sections of the I-T Act, claimed all the deductions that you are eligible for. For example:a. Under Sec 80 C - For investments made like PF, PPF, NSC, school tuition fees of children, insurance premium investments in specified mutual funds etc.b. Under Sec 80 G - Donations made to charitable organizations.c. Housing deduction for interest on housing loan etc.
9. Information of specified investments:
You also have to fill in information in respect of specified investments, as per prescribed limits, such as:Property bought or sold in excess of Rs 30 lakhMutual funds, in excess of Rs 2 lakh;Cash deposits in excess of Rs 10 lakh;Credit card payments in excess of Rs 2 lakh;Bonds etc in excess of Rs 5 lakh
10. Disclose exempt income:
It is also important to know that certain income that is exempt (i.e. income which is not taxable) is also required to be disclosed in the I-T return form.For example, dividend received and receipt of PF balance, among others. Not disclosing these incomes may land you in trouble also.

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