Salaried employees are at an ease to file returns where they have only employment income to report. However, where there is non-employment income as well, they need to be careful from the selection of the right return form to reporting details of other incomes. Here are some of the points salaried taxpayers need to keep in mind in relation to their other income.
Other sources of income
Rental income: If you own a house that was rented out during the year, the rent received is taxable. Where you own more than one house and one house is self-occupied, while the other is vacant (not rented out), you still need to pay tax on notional rental income for the other house. You can avail deduction of actual municipal taxes paid, standard deduction at 30% from the net rent and the interest on borrowed capital to acquire the property. You should carefully fill the particulars of house property in the return form.
Capital gains: Did you sell any asset during the year? If it was listed shares and/or mutual fund on which you paid security transaction tax (STT), the gain is not taxable where such shares/mutual funds were held for at least 12 months. However, where the holding period was less than 12 months, you need to pay tax at 15.45% on such gains. If you sold any residential house during the year, gains from such house is taxable at 20.6%, where you held the house for at least 36 months. The indexation benefit is also available. You may not have to pay tax where you reinvested the gains in another residential house, subject to meeting other specified conditions. But if the house was held for less than 36 months, you have to pay tax at normal rates. You will need to report the relevant details of gains in your returns, including gains where you are claiming exemption and/or reinvestment details as discussed above.
Interest/other income: Do you have interest on fixed deposits, saving bank accounts or other deposits? Do not forget to include interest on FDs made in the name of your spouse or minor children. You also get a deduction of Rs 1,500 from income of each minor child whose income is included. If you received any gifts from your friends (other than relatives), such gifts are taxable if they exceeded Rs 50,000 in aggregate during the year.
Payment of tax
If you have any non-employment income, you have the option to report such income to your employer, who would have then deducted tax at source. In case you have not reported such income to your employer, you have the obligation to pay such taxes in advance, where the net tax due is more than Rs 10,000. Taxes are required to be paid during the relevant tax year in three instalments—up to 30% by 15 September, up to 60% by 15 December and 100% by 15 March. If you have not paid the taxes in advance or there is shortfall, you need to pay penal interest at 1% under section 234C. Penal interest is also payable under section 234B where the unpaid advance tax was more than 10% of the total tax due. Do not forget to account for the taxes withheld by the payers of income, while determining the advance tax liability and also reconcile the details with your form 26AS available on the income-tax website. Taxes have to be paid before filing returns.
Other things to keep in mind
Choosing the form: In case you have income from salary, house property (where you do not own more than one house) and/or other sources (except winnings from lottery or income from race horses), you can use ITR1. Else, you would need to use ITR2. In case you (being an ordinary resident) have any foreign assets to report or are signing any account outside India, you will need to use ITR2.
Wealth tax liability: Take a look at your wealth to determine whether you have any obligation to pay wealth tax? Wealth tax is levied at 1% on the net taxable wealth exceeding Rs30 lakh and return of wealth is also required to be filed.
Keep documents in order: While no documents are to be attached with the return of income, it is strongly recommended to carefully maintain the supporting documentation so that in case return is selected for audit later, details are handy.
Kuldip Kumar is executive director (tax and regulatory services), PwC India.
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