1. Quote your correct PAN details
It may seem very obvious, but many of us make careless mistakes with our permanent account number (PAN) details on the income-tax return (ITR) form. Your PAN must be written correctly not only in the ITR form but also on the tax “challans”. If it is wrong, you will not get credit for having paid your taxes. Most importantly, a penalty of Rs10,000 can be imposed for not quoting, or misquoting, your PAN.
2. Be an early bird—file before the 31 July deadline
Start early. Remember, you don’t gain anything by delaying filing your return. If you are well within the deadline, you can save yourself the last-minute rush and also avoid careless mistakes. Being an early bird also helps if you have taxes overdue: You can avoid paying higher interest on the outstanding tax liability.
Finally, if you are planning on taking the online route, tax department servers can get clogged around the day of the deadline due to overload, throwing all your plans out of gear.
3. You need to file a return even if your employer has deducted tax at source
Many of us think we don’t need to file a return and that we have paid our dues to the tax department since our employer has already deducted tax. This is a wrong assumption. If your combined annual income from all sources is above the exemption limit, you will have to file taxes.
4. Arrange for all TDS certificates from all deductors
If you have salary income, you need to obtain a TDS (tax deducted at source) certificate in Form 16 from your employer. But if you have income from sources such as rent, interest, professional/consulting receipts or contractual or commission receipts, you need to obtain a TDS certificate in Form 16A.
5. Disclose income from all sources
A common omission in tax returns is the interest earned from your savings balance, fixed deposits or other small savings schemes. Always disclose all these sources of income in their entirety. With increasing digitization of the tax process and mandatory usage of a PAN for most financial transactions, the tax department can easily track your flow of funds and investments. Don’t let the authorities catch you!
6. Fill your annual information return (AIR)
To trace voluminous and bulky transactions, ITR forms contain a dedicated schedule which must be completed by every tax filer who has incurred specified transactions. These transactions are:
• Cash deposits aggregating Rs10 lakh or more in one bank account
• Credit card payments aggregating Rs2 lakh or more on a single card
• Mutual fund purchases aggregating Rs2 lakh or more in a single fund
• Single payment of Rs5 lakh or more for acquiring bonds or debentures of a company
• Single investment of Rs1 lakh or more in the shares of a company
• Single purchase or sale of an immovable property valued at Rs30 lakh or more
• Payment aggregating Rs5 lakh or more for investment in RBI bonds
Similar disclosures are also required to be made by banks, registrars, etc. So even if you do not disclose the above information, chances are that your counter-party might have already filed these details with the tax department. Always make such disclosures, if applicable, to avoid discrepancies and investigation.
7. You don’t need a CA to prepare your returns. Consider online filing
The tax code in India is relatively easy and over the past few years the tax department has made the form easier and more logical. You don’t always need the services of a chartered accountant for this. You can choose to do it manually or you might want to consider one of the many online filing services on offer. However, keep in mind that you will need a digital signature if you want to file electronically.
8. Pay self-assessment tax if required
In case the tax liability thus calculated exceeds the tax deducted or paid so far, then the excess tax liability has to be paid. The tax thus paid is called self-assessment tax. Income-tax challan No. 280 is used to pay self-assessment tax. Nowadays, this tax can even be paid online.
9. Refunds and your bank details
In case you don’t have taxable income and you have suffered undue tax deduction, you can file your return for a tax refund.
If you are filing a return for a tax refund, you need to ensure that you have mentioned your bank details correctly. This is essential because the refund amount will be credited directly to your account.
Please ensure that the following details are written correctly on your return: account type—savings or current, account number and the MICR code of your bank branch (the nine-digit number mentioned at the bottom of your cheques).
10. Ensure complete details pertaining to your tax deductions
The tax credit you might be eligible for depends on the authenticity and completeness of the data you transcribe on your ITR from the TDS certificates, advance tax challans and self-assessment tax challan.
Ensure that the TAN (tax deduction and collection account number) of the employer or deductor, the amount of the deduction and the date of the deduction are clearly stated. In case of self-assessment or advance tax challans, ensure that the name, branch address and BSR code of the bank where the tax is deposited, challan serial number, the amount and date of the deposit are clearly stated.
Prateek Agarwal is head of the tax advisory service at iTrust Financial Advisors.
Worried about capital security and assured returns?
Indications are that the government is planning to reduce interest rates on small savings schemes such as PPF, monthly investment schemes, post office time deposits, etc. A reduced interest rate will imply a lower after-tax rate of return on many of these investments. There might be other more tax-efficient and inflation-protected alternatives, such as lower-risk mutual funds, than the above-mentioned products. However, if you are more concerned about security for your capital and assured returns, then these schemes might still be the most suitable.
Watch your carpet area
When buying real estate, be familiar with industry conventions, especially those relating to floor area. Typically, the area that you pay for is higher than the area you actually get. While you might think you are buying a 2,000 sq. ft apartment and pay for the entire area, the actual usable area given to you (called carpet area) is only about 75% of that. This leakage is because some of the super built-up areas you pay for is used for common spaces such as corridors, staircases, walls and elevators in the building that you are buying your property in. Always clarify what the carpet area will be.
Get a cheaper mobile tariff plan
Have you checked your mobile phone billing plan recently? Chances are that there might be a cheaper plan available which you may not know about. Voice and data plans from various mobile operators in India have come down owing to the high level of competition. Spend 10 minutes reviewing your next mobile bill in detail to see if you might be able to get a cheaper plan with more features such as extra free minutes and SMSes. Depending upon your usage pattern, you might be able to save up to 50% on your bill.
Look out for the right NFOs
With the Sensex having risen dramatically in the past month, be ready for a flurry of new fund offers (NFOs) from mutual fund companies. However, don’t make the same mistakes that might have cost you during the last bull run. Watch out for these NFOs and only invest in those that are suitable for your risk profile, long-term investment horizon and financial goals. Every new fund is not meant to be invested in, however aggressive the marketing tactics of the fund houses.
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