Filing tax returns? A step-by-step guide

[K.Karthik Raja]

Filing tax returns? A step-by-step guide

It's that time of the year again. You knew all along that it would
come, whether you ignored or waited for it. The pages of the calendar
have turned and you can hear colleagues waking up to it.

And you know you can't run away from it any more. We are talking about
31 July, the day we are reminded of our bondage, the price we have to
pay for many of the good things in our life.

This happens to be the last day for filing income tax returns for all
salaried Indians, be they resident or non-resident. Of course, you
must have done everything legally possible to maximise your freedom
from this bondage called tax. But then, the law permits you only that
much. The rest, as they say, is illegal.You might also have wondered
about the word return being used for an outgo. Maybe it's because
governments always want citizens to see things from their point of
view, perhaps for the larger good.

Filing of tax is compulsory for everyone whose gross total income -
the income under the five heads (salary, business, capital gains,
house property or other sources) before allowing for any deductions
such as insurance premium - exceeds the basic exemption limit.

For financial year 2007-08 (assessment year 2008-09), this limit was
Rs 145,000 for women below 65 years of age, Rs 195,000 for senior
citizens (above age 65 years) and Rs 110,000 for any other individual.
It is compulsory for every person exceeding these limits to file the
return before the prescribed date, even if their employer has taken
care of their tax liabilities by reducing their salaries by the
necessary amounts before paying the rest to them. Paid this way, it is
known as tax deducted at source or TDS.

Filing of the form:

There are two income tax return forms,
ITR-1 and ITR-2, for salaried individuals. Your sources of income
(they will fall under one or more of the five sources mentioned
earlier) will decide your form. You will have to submit the filled
form to the tax authorities and get an acknowledgement from them.

Income source decides return form
ITR-1: Income from salary, pension and interest earned in a financial
year
ITR-2: Capital gains, income/loss from house property and income from
any other source

Use ITR-1 to file your tax return if your income is from salary,
pension or interest. In case of any capital gains, income or loss from
house property and income from any other source, you will have to use
ITR-2. You can go to www.incometaxindia.gov.in/download_all.asp to
download these forms.

You will find ITR-1 relatively simple to fill up. A prerequisite for
the exercise is Form 16, the certificate that comes from the employer
showing the TDS from the income chargeable under the head salary.
ITR-1 is almost a replica of Form 16. All you have to do is pick the
numbers from Form 16 and put them in the ITR form.

Apart from salary income, there is an important component of income
that many taxpayers ignore while filing their returns. It is the
interest income earned from the funds lying in savings accounts in
banks. Disclosing that, however small it may be, is mandatory.You just
have to add the total interest credited to your bank account in the
last financial year. Scrutinise your income tax return to ensure that
no taxable income is undisclosed. After you file your return, the tax
authorities will hand you an acknowledgment. That's it, you are
through with the filing of returns.You will need to fill up ITR-2 if
you, as a salaried individual, have made any capital gains. This form
is filled in the same way as ITR-1. In addition, you will have to
fill in income, if any, from house property and other sources.

How to file

The actual filing of return can be done either by using the
traditional paper form or electronically, over the Internet. The
second, known as e-filing, is fast catching up. The digital method is
compulsory for companies, but optional for salaried individuals still.
However, it may well become compulsory for individuals with a certain
level of income in times to come. So, it may not be a bad idea to
familiarise yourself with this process.

Before you start filing the return, check if you would be getting a
refund from the IT Department or have to pay tax. In case of the
latter, even before starting the filing process, you should first get
hold of Form 280, fill it up and deposit it any bank along with the
tax payable in cash or cheque. You can also pay tax through Internet
banking. In both cases, you will get a receipt number which has to be
quoted in the ITR form.


Checklist
* Keep ITR-1, ITR-2 forms handy
* Enter all the details in CAPITAL letters
* Ensure that name, address and other personal details are entered
correctly
* Double-check PAN number, bank account details and the MICR code you
write
* Store the acknowledgement safely property and income from any other
source

Doing it offline

There are two options - you may either submit the ITR form at the
nearest income tax office after filling it up yourself, or you may get
a chartered accountant or a tax return preparer to do it for you. Try
to visit the ITO well before the last date for filing return as crowds
increase as 31 July draws near.You may also take help from the public
relations officer of the ITO to fill the form. No documents or
investment proofs need to be attached with the form, but remember to
bring photocopies or originals with you to the ITO. These will come in
handy if you are asked to authenticate the maths.The fee of a CA would
depend on your income slab and the number of income sources.
Typically, it would range from Rs 300 to Rs 2,000, depending on the
complexities involved. One good thing about filing through a CA is
that it would bring down the margin of error to nil. Also, depending
on the acumen of the CA, which often gets reflected in the quality of
his practice, he would suggest some tax saving ways to you for the
future.

Doing it online

E-filing is done through sites authorised by the IT Department to file
taxes on your behalf. To e-file, you will have to input the details of
Form 16 in the software of the website, which would automatically
generate an electronic return in XML format.This format helps in
sharing of structured data across different information systems. A PDF
file of the relevant ITR form is also created along with the XML
format. You can download this ITR form, submit it at the ITO and get
an acknowledgement.Save the XML file to your desktop and then upload
it on incometaxindiaefiling.gov.in - the IT Department site. Some
sites also have provision for online payment of tax. Use of a digital
signature will render the e-filing process complete without involving
paperwork and visits to the ITO.In case DS is used, the
acknowledgement will be emailed to you. If you upload the file on the
tax department's site without the DS, the acknowledgement, called ITR-
V, emailed to you will have to be submitted at an ITO within 15 days
of downloading it. A DS can be acquired from any of the agencies
authorised by the government for the job, including the private and
government websites meant for filing tax returns.E-filing is not just
convenient and saves time, it can also be done from anywhere. What is
especially important is that the online method reduces or even
eliminates the interface between the tax assessee and tax officials.

Online sites

Among the major sites offering e-filing facilities are Taxspanner,
Taxsmile and Taxshax. You can either take printouts of the relevant
ITRs from these three sites and physically submit them or upload your
XML file on the IT Department's site.Taxspanner uploads the taxpayer's
file directly and emails ITR-V to him. With Taxsmile, you can submit
the forms at any of its offices spread over the country. They will
then forward it to the ITO.All the three sites are secure and easy to
navigate. The major difference among them is on two counts - the
number of income sources covered and the process. Get clarity on the
cost and features offered. The minimum cost package would normally be
only for salary income. The advanced version might be required if you
have income from other sources.The tax sites also differ in the way
they ask for information and allow you to input figures. Taxshax gets
most of the figures filled up in a single page. Taxspanner has a step-
by-step guide and takes one piece of information on one page. Taxsmile
gives both these options.Use of DS raises the cost of e-filing. The
amount of this increase varies across tax sites. A DS can be obtained
from Taxsmile for Rs 500. Apart from this, you will have to pay for
the basic package. Your DS comes with a validity period, after which
it has to be renewed.A DS from Taxspanner, for example, is valid for
two years. This site offers a deal in which you can file returns for
three years at a cost of Rs 250 a year. To get your DS from a tax
site, download the relevant form from it, attach the required
documents, such as your identity and address proofs, and courier them
to the address concerned. The entire process of acquiring a DS may
take around 15 days.

A tax return can also be filed from the government site -
incometaxindiaefiling.gov.in/portal/index.jsp - meant for it. Your PAN
will work as the username for registering at this site.

Should you go online? Internet accessibility is growing, but it is
still out of reach for many of the 40 million taxpayers. For those who
have access to it and want to save time, the digital signature way
looks ideal - you will be able to file the return in a few minutes
from the comfort of your home or office. E-filing without the DS is
almost the same as filing returns offline.Tax laws can often seem like
a cross between a Rubik's cube and Mutthiah Muralitharan's spin
bowling. The three private tax sites get around this by making
themselves friendly to taxpayers and not making filing of return
dependent on an intricate understanding of the workings of tax laws.
They empower with information and knowledge while taking the taxpayer
step-by step through the entire process of tax filing. The details of
the return filed get saved in the database of these sites and can be
accessed anytime in the future.If you have any specific doubts
concerning the filing process, email the tax site to clear them.
Getting clarity is important as some sites do not include things like
income from business or profession, losses of earlier years brought
forward or clubbed income. If tax is due, check if you can pay it
through the site.

Stick to the deadline
Whether you are going offline or online, make sure your are on the
right side of 31 July. If tax is due and return is not filed till 31
March of the following year, a penalty of Rs 5,000 is levied. Penalty
may also have to be paid in the form of interest. Check out the
answers on the next few pages to some frequently asked questions to
get on top of tax returns. And then go ahead and file with a smile.