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Confused about filing tax returns? Here's help

Last updated on: July 25, 2011 11:58 IST

Confused about filing tax returns? Here's help

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Anil Rego, RightHorizons.com

Saral, ITR, Sahaj or Sugam: What's your type?

It is yet again that time of the year, when individuals are scurrying around to find a helping hand to file their taxes (Hurry, July 31 is the last date). Most of us avail the help of a chartered accountant to get through this seemingly elaborate process, while, there are others who use the self-help option and manage to do a decent job themselves by filing returns online.

Tax filing has undergone a sea change over the years. While simplification seems to be the mantra behind these changes, it is ironical that the nuances of filing keep changing every year and it has become increasingly challenging for a layman to catch up. Here's a quick round up on what has changed over the past year and a few other tips to get your tax filing done:

Sahaj (Salaried -- ITR 1) & Sugam (Business -- ITR 4)

The ministry of finance has introduced the Sahaj & Sugam forms to make the process of filing income tax returns simpler and user-friendly. While Sahaj is for salaried people, Sugam form is applicable for small businessmen and professionals covered under presumptive taxation (the turnover is less than Rs 60 lakh (Rs six million) and where accounts are not required to be audited). These forms are very friendly as far as e-tax filing is concerned; they have been attractively designed and have bar codes, showing the tax and refund history of a taxpayer. They can be easily uploaded and information sought is similar to the earlier Saral form. The printouts are required in colour format, since they are designed to be machine-readable.

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ITRs (Income tax returns) forms and their relevance

There are currently a host of ITRs making tough for a layman to choose the right one and complicating for him the process of tax filing. In the previous year, anyone who had house property would automatically qualify to the ITR 2 category, however, this year, if there is only one house property then it would come under the ITR1 scanner and someone who owns more than one home will get into the ITR2 scanner. Below is a snapshot of the various ITR forms and their purposes.

ITR 1 (Saral 2 -- Sahaj): If you have income from salary, income from house property (only one house), income from pension, interest and capital gains which are tax free, then you can use the ITR 1 form.

ITR 2: You need to use this form if you have income from capital gains or rent from more than one house.

ITR 3: This is to be used if you are a partner in a firm.

ITR 4: If you have income from business or some profession, then use this form.

ITR 4S: If you have income from business (presumptive business income tax return)

ITR V: Where the data of the return of income or fringe benefits in Forms ITR 1, ITR 2, ITR 3, ITR 4 ITR 5, ITR 6 & ITR 8 is transmitted electronically without digital signature.

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Confused about filing tax returns? Here's help

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Refunds

The IT department with a view to achieving an image makeover amongst assessees, intends to clear-off all the smaller refunds (pertaining to filing made for FY11), by the end of March 2012. With a view to increase transparency and track income tax refund status, one can track the status of income tax refund in 4 simple steps here: Visit tin.tin.nsdl.com/oltas/refundstatuslogin.html

  • Enter your PAN
  • Select Assessment Year
  • Click Submit
  • Applicable refund status would be displayed

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Confused about filing tax returns? Here's help

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Claiming tax exemptions & deductions

If one has not already declared the deductions / exemptions as part of Form 16, then it is not all over yet, just not yet. You can claim your exemptions or deductions by including them in your ITR and claiming a refund from the IT department.

Most exemptions and deductions have not changed over the past year; amongst the popular exemptions you have the leave travel allowance, conveyance allowance, medical allowance and house rent allowance -- one needs to support these with relevant proofs whilst claiming the benefit.

Within the deductions, you have section 80C -- the limit here is up to Rs 1 lakh where all your investments like EPF, children tuition fee and housing loan principal is included. Section 80CCF, which allows up to Rs 20,000 of investment in infrastructure bonds can also be claimed.  There is also section 80D which allows medical premium paid to the extent of Rs 15,000 (for self and family) and up to Rs 20,000 for dependant parents.

Under section 80G, any amount paid to a charitable institution can be used to claim tax benefit (there are certain contributions which help one avail tax benefit of 50% and some others such as Prime Minister's Relief Fund, CRY etc., which enable one to avail 100% tax deduction). All of these need relevant proofs in the form of receipts.

Salaried individuals with taxable income of less than Rs 5 lakh will not have to file income-tax returns in the current assessment year. Instead they could give their bank interest and other details to their respective companies, who would then create a Form 16 with the given information. Thus the individual would not need to file tax separately as their Form 16 would act as valid proof of tax filing.

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This brief should help you understand the nuances of tax filing and hopefully mean that your taxes are filed within the deadline of July 31, 2011.

To Summarise:

If you are salaried earning less than Rs 5 lakh per annum please give bank interest and other details to company while creating Form 16; this will help you filing returns, Form 16 will be valid for tax filing. 

Choose the right ITR form depending on your source of income

File your tax returns by July 31, 2011

Avail tax benefit on any exemption / deduction that you have missed declaring in your Form 16. Attach relevant proofs as applicable to claim refund of taxes

Track your refund status online

You can choose to get the ITR acknowledgment stamped physically at the IT department or file it online and mail the hardcopy of the acknowledgment generated via ordinary post to the IT department within 120 days of online filing



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Anil Rego is the founder and CEO of Right Horizons , an investment advisory and wealth management firm that focuses on providing financial solutions that are specific to customer needs.