Filing Return of Income for Individuals

FILING RETURN OF INCOME FOR INDIVIDUALS FOR F.Y ENDING 31-03-2012 (A.Y. 2012-2013)

A. OBLIGATION TO FILE THE ROI:

Any Individual who has earned income during the previous year & his income is more than threshold limit is required to file Return of Income

B. PERMANENT ACCOUNT NUMBER (PAN):

A PAN number has been made compulsory for every transaction with the Income Tax department. It is also mandatory for numerous other financial transactions such as opening of bank accounts, availing institutional financial credits, purchase of high-end consumer item, foreign travel, transaction of immovable properties, dealing in securities etc. A PAN card is a valuable means of photo identification accepted by all government and non-government institutions in the country

C. FORM TO BE USED FOR FILING RETURN OF INCOME:

a. For individuals having income from salary, House Property, Interest Income & Exempt Income - Form ITR -1 or SAHAJ.

b. For individuals having income from salary, House Property Income, Capital Gain & Income from other sources – ITR -2.

c. For individuals having income from Business & Profession, – ITR-4.

The form for A.Y. 2011-12 has been notified by Income Tax Department. The same can be download from https://incometaxindiaefiling.gov.in/portal/individual_huf.do

D. DUE DATE FOR SUBMISSION OF RETURN OF INCOME:

31st July 2012(For F.Y.2011-12 i.e. A.Y.2012-13.) The return of income can also be filed On-line at www.incometaxindiaefiling.gov.in by using digital signature. A digital signature can be obtained by the help of professional on payment of prescribed fee.

E. WHAT DOES THE INCOME TAX DEPARTMENT CONSIDER AS INCOME?

The word Income has a very broad and inclusive meaning. In case of a salaried person, all that is received from an employer in cash, kind or as a facility is considered as income. For a businessman, his net profits will constitute income. Income may also flow from investments in the form of Interest, Dividend, and Commission etc. Infect the Income Tax Act does not differentiate between legal and illegal income for purpose of taxation. Under the Act, all incomes earned by persons are classified into 5 different heads, such as:

a. Income from Salary

b. Income from House property

c. Income from Business & Profession.

d. Income from capital gains

e. Income from other sources

F. INCOME FROM SALARY:

Salary received during the financial year 2011-2012 from one or more employer can be disclosed in return of income.

G. INCOME FROM HOUSE PROPERTY:

House property can be broadly classified into 2 categories viz.

(i) Self Occupied property

(ii) Let out Property

(i) Self occupied property :- It can be defined as a property which is acquired for living. You can claim the Interest deduction upto 150000/- for purchase in case of you avail the housing loan from the financial institution or Rs. 30000/- for repair.

(ii) Let Out Property :- If you earn rent from letting out the property than Rent income is taxable. However you can claim 30% of rent income as a deduction. & interest paid on loan for that property can be claim as deduction.

H. INCOME FROM CAPITAL GAIN:

All transfer of capital assets attracts capital gains. Capital assets are those properties that have an enduring value and they are not consumable. Transfer means giving up your right on an asset. It includes sale, exchange, compulsory acquisition under any law, relinquishment etc Capital Gain broadly classified into 2 Categories viz. (i) Long Term Capital Gain (ii) Short Term Capital Gain.

(i) Long Term Capital Gain :- If one has held capital assets more than 36 Month or 12 Month in case of shares & securities prior to transfer then the gain arise from such capital assets will attract Long Term Capital Gain.

(ii) Short Term Capital Gain :- If one have held capital assets less than 36 Month or 12 Month in case of shares & securities, prior to transfer then gain arising from such capital assets will attract Short Term Capital Gain.

COMPUTATION FOR CAPITAL GAIN TAX :-

Long Term Capital Gain Tax :- Keeping inflation in mind, the law provides the benefit of indexation in case of transfer of long-term capital assets as per the cost inflation index notified by the Central Government. Thus, indexation benefit is available in case of all long-term capital assets. Long Term Capital Gain is subject to tax @20%.

SALES REALISATION -

LESS : INDEXED COST OF ACQUISITON -

OTHER EXPENSES RELATES TO TRANSFER -

LONG TERM CAPITAL GAIN -

INDEX COST: Original Cost X Index for the year of sale

Index for the year of purchase

COST INFLATION INDEX

In the case of Long term capital gain arises from the transfer/ sale of shares / units where Security Transaction Tax is paid, and then gain is fully exempt.

SHORT TERM CAPITAL GAIN:- The short term capital gain arises on transfer of shares or securities where such transaction is chargeable to STT, the effective rate is 15% & in other case it will added in your total income.

I. INCOME FROM OTHER SOURCES:

(a) Gifts:

Where cash gift of more than Rs. 50,000/- is received from any person on or after the 1st day of April, 2006, then it is treated as income of the person receiving such money: However in following situation sum received shall not be income:

(a) from any relative; or

(b) on the occasion of the marriage of the individual; or

(c) under a will or by way of inheritance; or

(d) in contemplation of death of the payer.

The word "relative" means—

(i) spouse of the individual;

(ii) brother or sister of the individual;

(iii) brother or sister of the spouse of the individual;

(iv) brother or sister of either of the parents of the individual;

(v) any lineal ascendant or descendant of the individual;

(vi) any lineal ascendant or descendant of the spouse of the individual;

(vii) spouse of the person referred to in clauses (ii) to (vi).’.

(b) Income of Minors:

Income of minor children will be clubbed in the hands of the father or of the mother (income of whosoever is higher) subject to an exemption limit of Rs.1,500/- per child.

J. DEDUCTION:

(i) Deduction u/s 80C:

Following items are eligible for an aggregate deduction of Rs.1,00,000/- from total taxable income as per newly inserted Section 80C:

1. Life Insurance premium paid for self, spouse or children.

2. Any sum paid to effect or to keep in force a contract for deferred annuity for self, spouse or children.

3. Investments in Public Provident Fund (PPF).

4. Employee’s contribution to approved provident fund (PF)

5. Employee’s contribution to approved superannuation fund (SAF).

6. Subscription to National Savings Certificates (NSC)

7. Contribution towards ULIP of UTI, LIC or any other insurer.

8. Subscription to units of ELSS Mutual Funds (locking period of 3 years)

9. Investment in infrastructure bonds

10. Payment of tuition fees of children to any school or university or college or any other educational institute in India (upto a maximum of 2 children).

11. Repayment of principal amount of housing loan

12. Contribution to pension plan u/s 80CCC (e.g.: Jeevan Suraksha, HDFC pension plan etc)

There are no sectoral caps and the assessee can invest in any one or more of the instruments within the overall ceiling of Rs.1 lac.

The above investments need not be made out of chargeable income earned during the year. One can even borrow and invest the same in above to claim the tax benefits.

For the younger lot, the area of investments in Equity Linked Savings schemes seems to be appropriate since it offers the twin advantages of investment in equities (possibility of higher returns with a reasonable risk) as also tax savings.

(ii) Deduction u/s 80CCF – Subscription to long-term infrastructure bonds:

Being an Individual or HUF any subscription to long term infrastructure bond which is notified by the Central Government eligible for deduction of Rs. 20000/-.

(iii) Deduction u/s 80D - Medical Insurance Premium:

Individuals taking medical insurance can get deduction of Rs.15,000/- u/s 80D. However limit is Rs.20,000/- in case premium is paid for the insurance of senior citizens (resident individuals aged 65 years or more).

(iv) Deduction 80E - Repayment of interest on loan for Higher Education:

Deduction of interest amount repaid is available for a period of 8 years starting from the date of repayment.

(v) Deduction u/s 80G - Donations: Donations to specific trusts or funds –

50% u/s 80G or 100%.

(vi) Deduction u/s 80GG - Rents: In case you are paying rent for accommodation and not receiving house Rent Allowance, then deduction of rent paid can be claimed under this section subject to certain conditions

(vii) To sum up the above deduction we can conclude the following :-

K. ADVANCE TAX:

Advance tax is payable if tax liability exceeds Rs.10,000. However before determining amount of advance tax one can take credit of TDS and then pay advance tax as under :-

Before 15th Sept. 30%,

Before 15th Dec. 60%,

Before 15th March 100%.

L. INTEREST PAYABLE U/S 234A, 234B, 234C:

a. Interest for default in furnishing Return of Income (ROI) u/s 234A:

If ROI is not filed within due date, interest @1% per month is payable from the date immediately following the due date till the month of filing of ROI on net tax liability arrived at after deducting advance tax and TDS (i.e. on Self assessment tax).

b. Interest payable for default in payment of advance tax u/s 234B:

i) Failed to pay advance tax:

Interest @1% per month on tax liability minus TDS from first day of assessment year till the month in which tax is paid.

ii) Failed to pay 90% of tax liability:

Interest @1% on tax liability minus TDS and advance tax paid from the first day of assessment year till the month in which tax is paid.

c. Interest for deferment of advance tax u/s 234C:

If advance tax is not paid as per the limit then interest @1% per month is payable on the amount so deferred for 3 months for advance tax due on 15th September and 15th December and 1 month for advance tax due on 15th March.

M. INCOME WHICH DO NOT FORM PART OF TOTAL INCOME:

In computing the total income the following income is not part of total income :-

(a) any payment received under a life insurance policy

(b) any payment or interest received from a Public Provident fund.(PPF)

(c) any dividend received from Mutual fund or on equity shares

RATES OF TAXES :-

For Individuals:

Income upto Rs.1.80 lakh No tax liability

Income > 1.80 lakh and < 5.0 lakh 10%

Income > 5.0 lakh and < 8.0 lakh 20%

Income > 8.0 lakh 30%

For Women (below age 65):

Income upto Rs.1.90 lakhs No tax liability

Income > 1.90 lakh and < 5.0 lakh 10%

Income > 5.0 lakh and < 8.0 lakh 20%

Income > 8.0 lakh 30%

For Senior Citizens (above 60 years of age):

Income > 2.50 lakh and < 5.0 lakh 10%

Income > 5.0 lakh and < 8.0 lakh 20%

Income > 8.0 lakh 30%

For Super Senior Citizens (above 80 years of age):

Income upto Rs.5.00 lakh No tax liability

Income > 5.00 lakh and < 8.00 lakh 20%

Income > 8.0 lakh 30%

Note: Education cess @ 2% & Secondary Education cess @ 1% (2%+1%=3%) of tax liability.

General Guidelines:-

1. Check the Bank entries & find the interest and other Credits which is part of income.

2. Ensure that appropriate tax has been paid before the filing of return.

3. The Assessee can make electronic payment of taxes from the account of any other person.

4. Previous year’s acknowledgement should be carried to Income Tax Office for reference if the current return is being filed manually.

5. There is no requirement of any attachment or annexure with the returns.

O. GENERAL ERRORS COMMITTED WHILE FILLING-UP THE INCOME TAX RETURN AND ITS IMPACT.

Sometimes 'Short Name' is filled-up in the return form e.g." R.K. Anand", instead of say" Ram Kumar Anand". Always fill-up the name as is mentioned in the PAN Card. This will facilitate smooth and timely processing of the return.

Sometimes the alphabet in the PAN is incorrectly filled-up in the return form e.g. "O" is written as "Q", "P" is written as "D", "U" is written as "V" or vice-versa. This will result delay in processing the return.

Sometimes 'Father's Name' is not filled up. Filling-up "Father's Name' is mandatory for all ( i.e. for females also).

Always fill-up the 'Residential Address' in the return. Don't fill-up "Employer's Address." The Income tax Dept. refuses to accept the return if 'Residential Address' is not mentioned.

It is observed that "Bank Interest" and other investment income is not declared in the return, whereas full particulars of the Bank Account are filled-up. This results into concealment of Income liable for Penalty u/s. 271(1)(c) in case the return is selected for Scrutiny Assessment and it is found that Bank Interest has not been offered for tax. The minimum penalty u/s. 271(1) (c) is 100% of the Tax on 'Undeclared Income' and maximum is 300% of the Tax on 'Undeclared Income'.

Generally observed that "Exempt Income" e.g. Dividend, Interest on PPF, Long Term Capital Gain on sale of shares are not shown in the return. The relevant column should be properly filled-up invariably.

Following information about your transactions are collected from different agencies (Annual Information Report). The information is not required to be shown in return but should kept ready in file:-

1. Payment made by you against bills raised in respect of a credit card aggregating to two lakh rupees or more in a year.

2. Payment made by you of an amount of two lakh rupees or more for purchase of unit of Mutual Fund.

3. Payment made by you of an amount of five lakh rupees or more for acquiring bonds or debentures issued by a company or institution.

4. Payment made by you of an amount of one lakh rupees or more for acquiring shares issued by a company.

5. Purchase by you of any immovable property valued at thirty lakh rupees or more.

6. Sale by you of any immovable property valued at thirty lakh rupees or more.

7. Payment made by you of an amount of five lakh rupees or more in a year for investment in bonds issued by Reserve Bank of India.

8. Cash deposits (If any) aggregating to Ten Lakh Rupees or more in a year in your savings bank account .

Useful links:-

1. For General FAQ’s on Income, Return & others:- www.incometaxindia.gov.in/questionbank.htm#D44

2. For Online filing of return:- www.incometaxindiaefiling.gov.in

3. For download the Return form:- https://incometaxindiaefiling.gov.in/portal/individual_huf.do