Tax planning is an essential part of your financial planning. Efficient tax planning enables you to reduce your tax liability to the minimum. This is done by legitimately taking advantage of all tax exemptions, deductions rebates and allowances while ensuring that your investments are in line with your long term goals.
Yes, it is that time of the year again when we need to prepare tax returns. The July 31 deadline is closer than we think. And, to get us in good shape for filing tax returns here is a handy guide with 10 tips to keep in mind.
Fill out your correct PAN
We come across hundreds of tax filers who fill their wrong PAN details and then get into complications as a result of this carelessness. It might sound obvious, but make sure you put the right PAN details on your form and on any challans used to pay taxes.
An incorrect PAN number might also result in a problem in getting your tax refund quickly. And finally, you might have to pay a penalty of Rs 10,000 for not quoting or mis-quoting your PAN.
July 31 deadline: Avoid coming close to it
Don't wait till the July 31 deadline, file your return today. You will gain nothing by procrastinating.
In fact, if you attempt to squeeze in your return in the last minute you will cause yourself a lot of stress, and are exposing yourself to careless errors that can be avoided if you were to start the process early and leave enough time to review your return to your satisfaction.
If you have any overdue taxes you can avoid paying penal interest on this overdue liability. By starting early, you are also giving yourself the chance to pay off these dues a lot sooner.
Also, keep in mind that closer to the deadline, the tax department servers get overloaded. If you are choosing to e-file your return, you might get delayed if you can't get connected to the tax department's server.
Fully disclose all sources of income
Why invite trouble by not disclosing all sources of income you might have? With increasing digitisation of financial services and the use of your PAN number for almost all substantial financial transactions, it is easy to investigate what are the different sources of income you might have.
Yet, many tax-payers willingly don't disclose even interest income earned from one's savings balance, fixed deposits or small savings schemes. Don't expose yourself by omitting any obvious disclosure.
Annual information return (AIR) details must be filled
ITR forms require you to declare certain types of large transactions such as:
Even if you don't make these disclosures, it is likely that your counterparty might have already done so, and then the mismatch of disclosure might lead to an investigation into your finances.
1. Single purchase or sale of an immovable property valued at Rs 30 lakh
2. Single payment of Rs 5 lakh or more for acquiring bonds or debentures of a company credit card payments aggregating to Rs 2 lakh or more on a single card
3. Mutual fund purchase aggregating to Rs 2 lakh or more in a single fund
4. Cash deposits aggregating Rs 10 lakh or more in one bank account
5. Single investment of Rs 1 lakh or more in shares of a company
6. Payment aggregating to Rs 5 lakh or more for investment in RBI bonds
State your correct bank details to ensure timely refunds
You can file for a tax refund if you don't have a taxable income and you have faced undue tax deduction. In case you are filing a return for a tax refund, then you need to ensure that you have mentioned your bank details correctly, because the refund amount will be credited directly to your account.
The following details must be correctly stated on your return: Account type -- Savings or Current, account number and MICR code of your bank branch (this is the 9 digit number at the bottom of your cheques).