READYING FOR FILING INCOME TAX RETURNS

[Dr. Sanjiv Agarwal]

It is July month of the year now and hence get ready to file your income tax returns as the deadline for filing your tax returns for the Financial Year 2009-10 is 31st July, 2010.

 Leon Panetta said that "If we don't do something to simplify the tax system, we're going to end up with a national police force of internal revenue agents". Lest this may not happen the Central Board of Direct Taxes (CBDT) has come out with a new income tax Form - Saral-II. As the name 'Saral' suggests, the new form aims at making the process of filing income tax returns easier for individual taxpayers. The form is to be used to file the income tax returns for the financial year 2009-10 (assessment year 2010-11). The Saral-II is a two-page form. It was mentioned by the Finance Minister in his Budget speech for 2010-11 that "this form will enable individuals to enter relevant details in a simple format in only two pages". Thus Saral II has really made the life of salaried tax payer saral.

Distinct features of Saral-II

Saral-II is to be used by individual taxpayers having salary or pension income, income from one house property (excluding brought forward loss from previous years) as well as income from other sources (excluding winnings from lottery). Thus, in the earlier Form, if an individual had income under the head 'House Property', then he was required to fill in a different form, which was more complex in nature and required far more information/details to be filled in. Now, however, all incomes under the head 'Income from Other Sources', except for a few, can be filled in the new Saral Form. Therefore, the new Saral Form is particularly beneficial for individuals having salary income, income from one house property, and income from other sources. The introduction of the Form Saral-II aims at making filing of income tax returns easier for individual taxpayers, primarily having salary income and one house property.

Return Forms

Central Board of Direct Taxes (CBDT) has issued a set of new income tax return forms for the assessment year 2010-11 to enable the tax payers to file their returns.

There are eight forms in all, each applicable to a particular category of the taxpayer and are classified as SARAL II, ITR series 2 to7 and ITR-V. Simultaneously, e-filing of tax returns is now available for all categories of taxpayer, although it is mandatory only in the case of corporate taxpayers and firms which are liable to tax audit under Section 44 AB of the Income Tax Act (ITA).

How to file tax returns

Return forms can be submitted to the Income Tax Department in any of the following manner-

* By furnishing the return in a paper form;

* By furnishing the return electronically under digital signature;

* By transmitting the data in the return electronically and thereafter submitting the verification of the return in Form ITR-V (Provisional acknowledgement receipt)

* By furnishing a bar-coded paper return.

Where the form is furnished electronically followed by physical submission, the assessee should print out two copies of Form ITR-V. Both copies should be verified by the assessee and submitted to the Income-tax Department. The receiving official shall return one copy after affixing the stamp and seal.

Filing Saral II - Get acquainted

There are four worksheets named Home, Income Details, TDS Taxes Paid and Verifications. In "home' worksheet, instructions has given to fill the forms. You have to follow all the instructions carefully.

* Validate the data entry done on each of the sheets by clicking on 'Validate' button.

* Click on 'Calculate Tax' button on the 'Income Details' sheet. This will calculate Tax and Interest as per the data entered in the Excel Utility. (Note: Date of filing is taken as higher of system date and date entered in Verification.)

* Verify the calculated Tax and Interest figures in point nos 8 to 15.

* Check point no 16 of SARAL - II (Tax payable) in Sheet 'Taxes paid and Verification'.

* If the value is not zero, then pay Self Assessment Tax for this amount.

* Make Self Assessment tax entry and re 'Calculate Tax' and verify that amount in point no 18 is zero.

* Check summary data such as Total Income, Tax payable, Interest payable, Taxes paid

* After above steps completed for all sheets, click on Generate XML from any of the sheets.

* This will take you to a Pre XML sheet for a final review of the return.

* Review the number of rows entered in the various schedules and if modified, repeat Steps 1 to 9

* Click on 'Save XML' on the Pre XML sheet.

* The XML file is now saved in the same folder in which the Excel utility is saved, and can be uploaded to e-filing online portal.

Time line to file return

For the assessment year 2010-11 pertaining to financial year 2009-10, returns are to be filed now. In case of an individual, the last date for filing returns for the year ending March 31, 2010 is July 31, 2010, and for individuals who have to get their books of accounts audited under the Income Tax Act, it is September 30, 2010.

If you file your returns after the last date, you will be charged a penal interest at the rate of 1% per month or part of the month of delay. However, if such a return is filed after March 31, 2011, apart from the penal interest, you will also be liable for a penalty of Rs. 5,000.

The e-filing Process

Gone are the days when you have to stand in queues to file your income tax returns. Now returns can be filed online though e-filing process. E-filing is the process of electronically filing Income tax returns through the internet. It is a simple process in which one needs to fill up the tax return form provided online and the other required information such as income, expenditure and savings. Thereafter, it is a matter of logging into the income tax website.

Assessee should follow the following steps-

* Select appropriate type of Return Form.

* Download Return Preparation Software for selected Return Form.

* Fill your return offline and generate a XML file.

* Register and create a user id/password.

* Login and click on relevant form on left panel and select "Submit Return".

* Browse to select XML file and click on "Upload" button.

* On successful upload acknowledgement details would be displayed. Click on "Print" to generate printout of acknowledgement/ITR-V Form.

* Incase the return is digitally signed, on generation of "Acknowledgement" the Return Filing process gets completed. You may take a printout of the Acknowledgement for your record.

* Incase the return is not digitally signed, on successful uploading of e-Return, the ITR-V Form would be generated which needs to be printed by the tax payers. This is an acknowledgement cum verification form. The tax payer has to fill-up the verification part and verify the same. A duly verified ITR-V form should be mailed to "Income Tax Department - CPC, Post Bag No - 1, Electronic City Post Office, Bangalore - 560100, Karnataka" by ordinary postonly within 30 days after the date of transmitting the data electronically. ITR-V sent by speed post, registered post or courier will not be accepted.  In case, Form ITR-V, is furnished after the above mentioned period, it will be deemed that the return in respect of which the Form ITR-V has been filed was never furnished and it shall be incumbent on the assessee to electronically re-transmit the data and follow it up by submitting the new Form ITR-V within thirty days. This completes the Return filing process for non-digitally signed Returns.

Since income tax returns are to filed by the assessees by 31st July, here are few simple steps to be followed for filing hassle free tax returns. The assessee may follow the following Simple Steps to e-filing of Tax Returns -

·         Identify the sources of income under the income heads, viz, Income from salaries, Income from house property, Income from capital gains (long term and short term), Income from business and profession and Income from other sources

·         Keep the documents ready and check out which documents will be required for calculating tax.

·         Choose the appropriate return form.

·         Compute the gross total income by grossing up earnings from all five heads of Income to arrive at gross taxable income.

·         Calculate deductions by grossing up all Section 80C to 80U as allowed in income tax.

·         Allow deductions from gross total income. (4-5)

·         Compute total taxable income (rounded off), i.e. income on which Income tax is payable.

·         Find tax rates for the separate categories such as for women, senior citizens and 'others'

·         Calculate total income tax payable (including education cess and secondary and higher education cess)

·         Deduct the amount of relief (if any) from the total tax payable.

·         Take the credit of TDS, and advance tax.

·         Subtract amount of TDS and advance tax from tax liability to get the final amount to be paid as tax.

·         Calculate the amount of interest u/s 234A, 234B and 234C (if applicable).

·         Provide full and correct bank details like name of the bank, address of the branch, Account number and MICR number for crediting the refund quickly in the bank account.

·         Identify the due date applicable to you and file Income tax return before the due date to avail the benefit of carry forward of business losses and losses under the head income from other sources.

·         Filing returns-You can file your returns offline (Physical mode) or online (e-filing).

·         E-filing can be done even on Sunday.

·         E filing is available round the clock except for planned maintenance activity.

Documents to be preserved by assessee

Since the tax-payer is not required to submit any additional documents along with the return of income, the documents may be called at the later stage by the Income Tax Officer to verify the correctness of the claim made. Hence, it is advised that the individual preserve all the documents required to substantiate the return of income filed. Some of the documents could be the card with your Permanent Account number (PAN), known as the PAN card. You just need to mention the number in your tax return. The documents would include statement of computation of income and tax ,TDS certificates in form 16 or 16A as applicable, details of all bank accounts operated during the year with details of deposits, withdrawals and interest earned, certificates/receipts of payment of insurance premium, provident fund, investments in NSCs, new equity shares, mutual funds, NSS, medical insurance, donation, etc. in support of deduction claimed, audit report, balance sheet, trading, profit and loss account, personal account of proprietor  or partners, statement of receipts and payment where no regular of books of accounts are maintained, Tax u/s 44AB wherever required, certificate of interest on housing loan from the lender, in support of deduction from house property income, other documents/statements in support of income and expenditure etc.

The documents should be kept ready for any reference though documents are not supposed to be annexed to the return. These may how ever be required for verification at a later stage.