Importance Of Filing Income Tax Returns

 

Complete Guide to Online Income Tax e-filing

Importance Of Filing Income Tax Returns

If you have earned Rs. 5 lakh or more during the financial year 2012-13 i.e. the year starting from 1 April 2012 and ending on 31 March 2013, you will need to file your returns electronically. The income tax authority i.e. the Central Board of Direct Taxes is responsible for the diktat.

And as usual, you need to file your return before 31st of July, 2013. Well, this task may seem a little daunting at first glance as we are all so used to the paper mode of filing returns, but don’t despair since the process is quite simple and easy. Read on to know more.

Steps for e-filing returns

The e-return can basically be filed in two ways as detailed below:

1. Directly on the website: If you have only salary and interest income, you may simply visit https://incometaxindiaefiling.gov.in/, register yourself if not already done, and key in the details online in Form- ITR 1, prepare the return and submit it. You would then have to print the acknowledgement, sign it and send it to the central processing unit.
2. By downloading the excel utility: Here, you have to log on to the above site, select the applicable return form. You then need to download the excel utility, fill in all the details offline and then upload this as an XML file. On successful submission, an acknowledgment in ITR V would be mailed to your email address. If you have digitally signed your return, then the process is completed. If not, you would have to sign and send the printed acknowledgement to the central processing unit.

Which form is applicable to you?

The Pros and Cons of E-filing:

As with everything else in life, there are both advantages and disadvantages in this method of filing income tax returns. Here’s a look.

Advantages:

• Tax calculation is accurate and simplified as it is done automatically by the software based on your inputs.
• Possibility of quicker refunds since the e-return is processed centrally at the central processing unit at Bangalore. You would be spared of the hassles of following up on your refund with your income tax office as is the practice now.

Disadvantages:

• You may now need to seek professional help if you wish to do this process offline, and this may cost money.
• Given the rather poor internet connectivity in most parts of India, the process could be quite time consuming.

However, the online process if far more efficient than the offline one, and in the long run, it will only help smoothen the filing and refund process.

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How to Calculate Income Tax

 

For any tax paying individual, to have a working knowledge of how income tax is calculated can only make life simpler. It not only helps you assess the amount of tax you have to pay in a financial year but also gives you a clearer idea on how to save tax.

Income Tax is tax levied on the income of an individual by the Government. Computing your Income Tax for a year might seem like a complex process but you will see that it is easy, if you are aware of the income tax slabs of that particular year and know the mathematical calculation.

Knowing Taxation amount as per the Income Tax Slabs

The first step to understand the workings of Income Tax in India is to be aware of the taxation slabs released each financial year by the Indian Government. The taxation slabs for the financial year 2014-15 for General tax payers and Women: –

Slab	Income Slab (Rs.)	Income Tax Rate
0	0 to 2,50,000	NIL
I	2,50,001-5,00,000	10%
II	5,00,001-10,00,000	20%
III	10,00,001 and above	30%

If you fall in Slab I, tax will be deducted on the amount that exceeds Rs. 2,50,001/- . Similarly, tax for Slab II and Slab III will be calculated for the amount that exceeds Rs. 5,00,001/- and Rs. 10,00,001/- respectively. The same principle also applies to the tax slabs for senior citizens (Aged 60 years but less than 80 years):-

Slab	Income Slab (Rs.)	Income Tax Rate
0	0 to 3,00,000	NIL
I	3,00,001 to 5,00,000	10%
II	5,00,001 to 10,00,000	20%
III	10,00,000 and above	30%

India Income tax slabs 2014-2015 for very senior citizens (Aged 80 and above):-

Slab	Income Slab (Rs.)	Income Tax Rate
0	0 to 5,00,000	NIL
I	5,00,001 to 10,00,000	20%
II	10,00,000 and above	30%

Deductions available for saving tax

To opt for saving the maximum amount of tax, examine the deductions defined under different sections of the Income Tax Act, 1961.

The available deductions are:–

• Investment under Section 80

This section includes: –

• Mediclaim insurance premium (u/s 80D)
• Donations with 100% benefit (u/s 80G)
• Interest repayment for education loans (u/s 80E)
• New Pension Scheme for a maximum of 10% of the basic salary (u/s 80CCD)
• And Rajiv Gandhi Equity Savings Scheme (u/s 80CCG).

The Investment limit for the deduction under Section 80C of the Income-Tax Act, 1961 was raised from Rs 1 lakh to Rs 1.5 lakh as per the budget 20014-15. This will result in a maximum saving of Rs. 15,450 to investors in the 30% tax bracket. The most common investments fall under this section: –

• Life Insurance policies
• Employees Provident Fund/Public Provident Fund
• National Savings Certificates or Interest accrued on old NSCs
• ULIPs (Unit Linked Insurance Plans)
• Repayment of home loan for principal amount only.
• Pension Funds u/s 80CCC
• Tax saver Mutual Funds  – ELSS: Equity Linked Savings Scheme
• Tuition fees of children’s education.

• Housing Rent Allowance u/s 10(13A).This is an allowance you get as a company employee for paying house rent. Deduction available on House Rent Allowance is an amount which is the least of the following parameters:–

Actual HRA received

OR

Actual rent paid by you minus 10% of your basic salary and other allowances (excluding HRA)

OR

50% of your basic salary

In cases where the last two parameters determine the deduction amount, and turns out to be less than the HRA paid by your company, the excess amount is considered as a part of your taxable income.

• Home Loan Benefit u/s 24. This gives you deduction for the interest that you pay on your home loan and the maximum deduction limit has been raised (as per 2014-2015) to Rs. Rs.2,00,000 for a self-occupied property. For a property that is not self-occupied, there is no upper cap on the deduction limit.

Calculating your Taxable Income and Income Tax

In order to do the calculation, it is imperative to understand how income tax is deducted. If your income falls within a certain slab only, say Slab I (as per the tax slabs mentioned above), then the calculation is simpler. But if your salary falls in more than one range, the income tax is the sum of the tax calculated from each slab as per the designated tax rate of the said financial year.

In other words,

Income tax for income in Slab II = 10% of Slab I + 20% of slab II

Income tax for income in Slab III = 10% of Slab I + 20% of Slab II + 30% of Slab III

Here’s an example* of the income tax calculation of a person earning Rs.10 lakhs, and a comparison of how he will fare with this year’s budget rules as opposed to those of last year’s –

 

As shown in the examples above, tax calculation is not as complex an affair as it is made out to be. You just need to be aware of the tax slabs for the financial year in question, the deductions available and how taxable income is determined. Once you have clarity on these three aspects, calculating your income tax becomes very simple.

*sourced from – http://www.jagoinvestor.com/2014/07/budget-2014-highlights-and-download-income-tax-calculator.html

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