Wednesday 26 February 2014

Checklist of Documents & Records - Filing Income Tax Returns [A.Y.2012-13]

Coming 31st of March 2014 is the last date of filing of income-tax returns for the FY 2011-12 [AY 2012-13], with late-payment interest. Also to note that, the due date of filing for FY 2012-13 [AY. 2013-14] was 5th August 2013 and it too attracts interest for late-payment.

Here we discuss the bare minimum required supporting documentation in order to prepare the ITR-form to file the income-tax returns, for Individuals & HUF - [herein referred as assessee].
  1. PAN card.
  2. Filed-Returns of the previous years, if any.
  3. Proof of Income, like payslips or paid vouchers or bank-statements showing the deposits.
  4. Full Annual statements of all the Saving-Bank Accounts held in the Name / PAN of assessee.
  5. TDS certificates, if any.
  6. Proof of Expenditure like receipts of, bills paid, rent paid, medical bills of self / dependents, etc.
  7. Proof of Deductions from Investments made [if any] like paid-receipts of, Life-Insurance, Mutual Funds, NSS, EPF, Tuition Fee of children, etc, or Donations for recognized institutions / organisations such as under Section 80G, 80GGA, etc.
  8. Balance Sheet, Profit & Loss Statement, other Audit reports wherever applicable.
#The documents to be provided should be photo-copy or scanned copy of the original documents and NOT the original documents itself.

Certain set of documents are needed for the return-preparer to analyse and aggregate income received to calculate the income-tax after any deductions as applicable. The deductions for example can be from the sub-sections of Section 80, in the case of  80C in the case of Life-Insurance policy or Housing Loan. There are others like 80G for donations to recognized institutions or 80GG for housing rent paid.

Wednesday 18 April 2012

Income Tax Return [ITR] Forms

Income tax returns are filed with applicable ITR form. The ITR form may vary from one assessee to another, depending upon the nature and sources of income are identified.

As the assessees' are categorised into two,
  1. Individuals & H.U.F's
  2. Businesses
 they have different ITR forms as applicable, as tabulated and explained here below.

 1. For Individuals & H.U.F

Sources/Details of Income
Individual, HUF
1Income from Salary/PensionX
2Income from Other Sources [only Interest Income or Family Pension]X
3Income/Loss from Other SourcesXX
4Income/Loss from House PropertyXX
5Capital Gains/Loss on sale of investments/propertyXX
6Partner in a Partnership FirmXXX
7Income from Proprietary Business/ProfessionXXXX
8Income from Presumptive BusinessXXXX
9Details of Foreign AssetsXX

2. For Businesses

Sr.#DetailsITR Form
1For Firms, AOPs and BOIsITR-5
2For Companies, other than companies claiming exemption under section 11ITR-6
3For person required to furnish return under section 139(4A)/ (4B) / (4C)/ (4D)ITR-7

Sunday 15 April 2012

Auditable Books of Records - If Applicable, as Necessary

A specified books of records may have to be maintained for certain sources of income in order to comply with the Income Tax Act. However it may not be applicable to every assessee, and would be applicable only if they fall under those sources of Income or exceed a certain amount slab, etc.

Wednesday 11 April 2012

Computation [Calculation] of Income Tax

Computation [calculation] of Income tax is based on the net total income of the tax assessee. The computation has a varied gradient which can be very simple, and can get complicated depending on the type of Incomes received and other specified factors.

Salient features for computing the Income Tax are as follows;
  • The tax payable is normally computed after the end of the financial year and paid in the subsequent financial year [also called as 'Assessment Year' or simply 'AY' ], within a stipulated time in order to avoid late payment penalty and other applicable additional levies.
  • Also note, that the taxpayer/assessee may liable to pay Income tax in advance [known as 'Advance Tax'], if the net Income tax payable exceeds Rs.10,000/- for any financial year. Refer below table;
    Status By 15th June  By 15th Sept  15th Dec  15th March
    Corporate 15% 45% 75% 100%
    Non-Corporate  nil 30% 60% 100%
  • Tax for income from sources such as salaried and other remunerated incomes, from most organisations nowadays deduct the Income tax at source and paid on your behalf to the ITD. This process is termed as 'Tax Deducted at Source' [TDS].
  • To keep the economy running, the Income Tax Act also has provisions for various deduction benefits from the taxable income. These deductions are mostly in the form of Financial investments like Life-Insurance, Government bonds, Savings Certificate, even certain Education-fees, Housing-loans, to name a few.
  • Additional benefits also can be availed if the taxpayer decides to donate to certain charitable institutions, which are registered under the Income Tax Act.
As mentioned in the advance tax table above, there is a hint of split/category of two basic units under which Income Tax are calculated, i.e., for Individuals/HUF and Business units. Therefore, slab Rates for the FY 2012-13 [i.e. AY 2013-14] as announced during Union Budget [ 2012] are divided into following Categories.
  1. Individuals & H.U.F
  2. Businesses

A. For Individual & H.U.F, the sources of Income fall as into the below five listed;
  1. Income from Salary
  2. Income from House property
  3. Income from Business or Profession
  4. Income from capital gains
  5. Income from other sources
Incomes are normally imposed in slabs under the net income from all the sources for Individual and HUF, and is normally flat rates for other assessee's. For clear understanding on the rate of Income tax, refer the below table for precise understanding.

Income Range General (non-senior citizens) Category Senior Citizens (Men and Women above 60 years of age), but below 80 years Very Senior Citizens (Men and Women above 80 years of age)
Upto Rs. 2,00,000 Nil Nil Nil
Rs. 2,00,001 to Rs. 2,50,000 10% * Nil Nil
Rs. 2,50,001 to Rs. 5,00,000 10% * 10% * Nil
Rs. 5,00,001 to Rs. 10,00,000 20% 20% 20%
Above Rs. 10,00,000 30% ** 30% ** 30%**

Monday 2 April 2012

Know Your 'PAN'

Permanent Account Number or simply PAN  is a ten-digit alphanumeric number, issued in the form of a printed plastic [earlier days, it was paper printed & laminated] card, by the Income Tax Department [Government of India], to any “Indian-national applicant” who applies for it or in some cases to whom the department allots the number without an application.

An example of how a PAN card looks like.
PAN enables the department to link all transactions of the “person” with the department. These transactions include tax payments, TDS / TCS credits, returns of income / wealth / gift / FBT, specified transactions, correspondence, and so on. PAN, thus, acts as an identifier for the “person” with the tax department.

PAN was introduced to facilitates linking of various documents, including payment of taxes, assessment, tax demand, tax arrears etc. relating to an assessee, to facilitate easy retrieval of information and to facilitate matching of information relating to investment, raising of loans and other business activities of taxpayers collected through various sources, both internal as well as external, for detecting and combating tax evasion and widening of tax base.

A typical PAN, for example looks like this. ABCPE1234Z.
  • First three characters i.e. 'ABC' in the above PAN are alphabetic series running from AAA to ZZZ
  • Fourth character of PAN i.e. 'P' in the above PAN represents the status of the PAN holder. 'P' stands for Individual, 'F' stands for Firm, 'C' stands for Company, 'H' stands for HUF, 'A' stands for AOP, 'T' stands for TRUST etc. [refer the table below for better understanding]
  • Fifth character i.e. 'E' in the above PAN represents first character of the PAN holder’s last name/surname.
  • Next four characters i.e. '1234' in the above PAN are sequential number running from 0001 to 9999.
  • Last character i.e. 'Z' in the above PAN is an alphabetic check digit.

 Status of Assessee
Fourth Character of PAN
 Individual Person
 Hindu Undivided Family
 Firm / Limited Liability Partnership
 Association of Persons [AOP]
 Body Of Individuals[BOI]
 Trust [AOP]
 Local Authority
 Artificial Judicial Person

To obtain a PAN, one has to submit the filled application form,
  • Form 49A - For Indian Citizens,
  • Form 49AA - For Foreign Citizens.
Proof of documents and two passport size photos [in the case of Individual only] also has to be attached to the application form.

Note: Only one PAN should be obtained in any case of the above assessee. Any possession of more than one PAN is an offense, and if already obtained more than one - the additional have to be surrendered back to Income Tax Department.

Sunday 1 April 2012

Income Tax - India

Income Tax is the levy (tax) imposed by Income Tax Department, Government of India as direct tax on individuals or entities (taxpayers), who earn income in India and the rate of Income Tax varies with the income or profits (taxable income) of the taxpayer.

The Central Government of India has been empowered by Entry 82 of the Union List of Schedule VII of the Constitution of India to levy tax on all income other than agricultural income (subject to Section 10(1)). It is levied as per strength of an act called 'Income Tax Act 1961', according to 'Income Tax Rules 1962', passed by Parliament of India. Notifications and Circulars issued by Central Board of Direct Taxes (CBDT), Annual Finance Acts and Judicial pronouncements by Supreme Court and High Courts.

In India, Income tax was introduced in 1860, abolished in 1873 and reintroduced in 1886. Income tax levels in India were very high during the period 1950-1980, and in 1970-71 there were 11 tax slabs with highest tax rate being 93.5% including surcharges. It was in 1973-74 where the highest rate was 97.75%. But to reduce tax evasion tax rates were reduced later on, by 1992-93 maximum tax rates were reduced to 40%, which is the present high 2012-13.

The very first step to enroll and pay Income Tax in India, is that every taxpayer is to obtain an unique alpha-numeric number, called 'Permanent Account Number' or simply called 'PAN', issued by the Income Tax Department  in the form of printed plastic card [6cm x 9cm]. The car is allotted to whoever applies for it or in some cases to whom the department allots the number without an application. Know more about PAN, click here.

Once the PAN is obtained, the taxpayer/assessee is supposed to compute his income [from all the various sources] and pay the Income tax amount to the Income Tax Department, GOI. The tax can be paid in any of the recognised banks - which is now almost becoming obsolete, as modernisation and computerisation of the whole process is now online, hence online payment is much sought after nowadays. To learn about computation of Income tax, click here.

Certain books of records has to be maintained, and it may have to be audited to comply with the Income Tax Act. To learn more about books of records & audits, click here.

After the computed Income Tax is derived and paid to the ITD, the assessee has to compulsorily file returns by using the relevant and adequately completed 'Income Tax Return' [ITR] form as necessary. Ever since the whole process of paying and filing returns of Income tax been computerised, normally the ITR's are filled from the start point of the whole process - hence it arrives at an accurate records that would be filed and making the whole process simpler. To know more about ITR-forms, click here.

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