I felt there could not have been a better time to write this blog as the time for Income Tax return filing for Salaried individuals now and here. (31st July is the due date of filing return)
Let us understand first WHO is liable to file a Income Tax Return (ITR) as per Indian laws and we would understand this in the context of a Salaried Individual.
1. Those who have taxable income of more than Rs. 2 lacs in a financial year (you may check Serial No. 11 of Form 16 "Total Income ") for the purpose of this. This income is after allowing you various deductions (u/s 10, 24 and Chapter VI of the Income Tax Act). Hence, if this Serial No. 11 is below Rs.2 lacs, you are not liable to file return.
Financial year in India starts from 1st April every year and ends on 31st March of the following year. For example current Financial Year started on 1st April 2013 and would end on 31st March 2014)
2. Now, there could be case when you have earned less that Rs.2 lacs but the Income Tax (TDS) has been deducted because of some reason by your employer. Should you file ITR in this case. The liability to file ITR does not arise as per above, but to get the extra tax refunded by Government (IT Department), you must file ITR and get your TDS back. (will explain the process of filing and getting refund also later in this blog)
3. There could be scenario where you have earned Income as per Form 16 below Rs.2 lacs but you have also earned Interest Income from bank FDR, savings bank account etc. and the total of these exceed Rs.2 lacs, you must file ITR in such a case after paying taxes due on your Total Income (Interest income + Salary Income).
4. There could be a scenario where you have earned income from more than 1 employer during the year and your income from both Form 16 (S.No.11) exceed Rs.2 lacs. Even though , there is no TDS deducted by either of the employers, you must pay your taxes and file your ITR. I feel, you must take help of a professional in this case unless you know how to calculate taxes correctly.
There is another Circular of IT department as per which the ITR is not required to be filed if the Total Income (Salary + Interest) is not more than Rs. 5 lacs and the TDS has been deducted by employer on the Total Income including interest income. I see very little utility of this as the TDS is not deducted by employer on your interest income, also, I feel filing ITR allows you to avail many facilities such as housing / car loans and also helps in getting visa for travel abroad etc. (Please see detailed circular, if you need to know more about eligibility and conditions etc.)
Now, let us understand the procedure for filing ITR and discharging your tax liability.
Once you know that you have to file ITR, the outline of the process of filing is as under:
1. Obtain your Form 16 from your employer / employers
2. Obtain the details of Interest Income from your banks for your savings and FDR. There could be TDS deducted by banks also.
3. Check the TDS in your online Form 26AS at Income Tax e-filign website. All TDS deducted as shown in Form 16 and as shown by bank in TDS certificate issued by them should appear in Form 26AS.
4. Compute tax as per the tax rates for FY 2012-13 as per Income Tax Act
5. If the TDS is deducted sufficiently (i.e. your computed tax exceeds TDS, you do not have to pay taxes)
6. Pay balance Income Tax in case TDS is less than you computed tax
7. Prepare ITR in Form ITR1 as prescribed for FY 2012-13 (FY 2012-13 is called Assessment Year 2013-14 also)
8. Generate xml file and file it online. It is compulsory to file online at e-filing web site of Income Tax department, if your income exceeds Rs. 10 lacs.
9. Generate the acknowledgement and sign and send it to Bangalore address given in the Acknowledgement.
10. Others can file it offline by filling a manual form ITR 1 from the Income Tax website and deposit it at the Income Tax department after ascertaining their jurisdiction.
Let us also understand the meaning of filing ITR. What are the effects and benefits.
Let us understand first WHO is liable to file a Income Tax Return (ITR) as per Indian laws and we would understand this in the context of a Salaried Individual.
1. Those who have taxable income of more than Rs. 2 lacs in a financial year (you may check Serial No. 11 of Form 16 "Total Income ") for the purpose of this. This income is after allowing you various deductions (u/s 10, 24 and Chapter VI of the Income Tax Act). Hence, if this Serial No. 11 is below Rs.2 lacs, you are not liable to file return.
Financial year in India starts from 1st April every year and ends on 31st March of the following year. For example current Financial Year started on 1st April 2013 and would end on 31st March 2014)
2. Now, there could be case when you have earned less that Rs.2 lacs but the Income Tax (TDS) has been deducted because of some reason by your employer. Should you file ITR in this case. The liability to file ITR does not arise as per above, but to get the extra tax refunded by Government (IT Department), you must file ITR and get your TDS back. (will explain the process of filing and getting refund also later in this blog)
3. There could be scenario where you have earned Income as per Form 16 below Rs.2 lacs but you have also earned Interest Income from bank FDR, savings bank account etc. and the total of these exceed Rs.2 lacs, you must file ITR in such a case after paying taxes due on your Total Income (Interest income + Salary Income).
4. There could be a scenario where you have earned income from more than 1 employer during the year and your income from both Form 16 (S.No.11) exceed Rs.2 lacs. Even though , there is no TDS deducted by either of the employers, you must pay your taxes and file your ITR. I feel, you must take help of a professional in this case unless you know how to calculate taxes correctly.
There is another Circular of IT department as per which the ITR is not required to be filed if the Total Income (Salary + Interest) is not more than Rs. 5 lacs and the TDS has been deducted by employer on the Total Income including interest income. I see very little utility of this as the TDS is not deducted by employer on your interest income, also, I feel filing ITR allows you to avail many facilities such as housing / car loans and also helps in getting visa for travel abroad etc. (Please see detailed circular, if you need to know more about eligibility and conditions etc.)
Now, let us understand the procedure for filing ITR and discharging your tax liability.
Once you know that you have to file ITR, the outline of the process of filing is as under:
1. Obtain your Form 16 from your employer / employers
2. Obtain the details of Interest Income from your banks for your savings and FDR. There could be TDS deducted by banks also.
3. Check the TDS in your online Form 26AS at Income Tax e-filign website. All TDS deducted as shown in Form 16 and as shown by bank in TDS certificate issued by them should appear in Form 26AS.
4. Compute tax as per the tax rates for FY 2012-13 as per Income Tax Act
5. If the TDS is deducted sufficiently (i.e. your computed tax exceeds TDS, you do not have to pay taxes)
6. Pay balance Income Tax in case TDS is less than you computed tax
7. Prepare ITR in Form ITR1 as prescribed for FY 2012-13 (FY 2012-13 is called Assessment Year 2013-14 also)
8. Generate xml file and file it online. It is compulsory to file online at e-filing web site of Income Tax department, if your income exceeds Rs. 10 lacs.
9. Generate the acknowledgement and sign and send it to Bangalore address given in the Acknowledgement.
10. Others can file it offline by filling a manual form ITR 1 from the Income Tax website and deposit it at the Income Tax department after ascertaining their jurisdiction.
Let us also understand the meaning of filing ITR. What are the effects and benefits.
- If you have filed your ITR, that means you have discharged your income tax liability. This is confirmed when the Income Tax department sends you intimation u/s 143(1).
- If you have paid extra taxes either through TDS or otherwise, shall be refunded to you by Income Tax department.
- Filing ITR gives you proof of your income which is acceptable to banks and based on ITR you can approach banks for availing housing / car / other loans.
What if I do not file ITR even if I am covered; the TDS has been deducted by my employer fully?
The common misconception is that I am not required to file ITR as the TDS is already deducted by my employer fully. The liability to file ITR is different from paying taxes and ITR is a statement of the fact that you have discharged your Income Tax liability. In the absence of this, the IT department would not know your actual liability and may not consider your liability discharged.
There are separate penalties for not filing ITR even though your taxes may have been paid in full.
These are my personal views and should not be considered as legal advise. You are requested to consult a professional before acting on this blog.
For any query / suggestion on my blogs, feel free to write to me at piyushsgarg@gmail.com.
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