Take the stress out of filing your tax return
Dreading the annual ritual of filing tax returns? Being familiar with the changes in tax rules can ease the process for salaried taxpayers
For many taxpayers, return filing is a dreaded activity which they put off until the last minuteeven beyond the due date.
But this year, such procrastination will mean paying a huge price. The penalty for late filing is ₹5,000, making it imperative to meet the 31 July deadline. If the delay is beyond 31 December, the fine is higher at ₹10,000. Therefore, it’s best to kick off the process right away. Read on to find out more.
Changes in tax rules
Before you embark on the process to file the return for the assessment year 2018-19 (financial year 2017-18), you need to be aware of some fundamental rules and key changes in the income tax return (ITR) forms this year. Knowledge of slab rates, for instance, can help you compute your tax liability correctly. The slab rate applicable to an individual drawing taxable income between ₹2.5 lakh and ₹5 lakh has been reduced from 10% to 5%. This is also the year when taxpayers who own more than one property and claim tax benefits on the home loan interest paid will feel the pinch. Till the financial year 2016-17, you could avail of tax break on the entire interest paid – considered ‘loss’ – on home loan for let-out properties. “The entire loss was allowed to be set off against other income without any limit,” adds Agarwal. But from this year, the tax rules have been changed. “The government has restricted the benefit of set-off loss from house property to a maximum ₹2 lakh per financial year and the balance loss can be carried forward to next eight years,” explains Chetan Chandak, Head of tax research, H&R Block.
While this has hurt taxpayers who had invested in property, another change in rule has made them smile. This pertains to capital gains/losses on investments and immovable properties. “Holding period for capital gains to be considered on immovable property has been reduced from three years to two years; also, year 2001 will now be the base year for calculating the capital gains,” says Chandak. The new cost inflation index, too, has been released.
Changes in tax forms
This apart, the ITR forms too have undergone several changes this year. “Till last year, only net taxable figures of salary and house property income were required to be disclosed. This year, detailed calculations in respect of salary and house property income are required in ITR-1 and ITR-4. Address of property would also be required for house property income,” says Sandeep Sehgal, Director, Tax and Regulatory, Ashok Maheshwary & Associates.
Till last year, if an individual or Hindu Undivided Family (HUF) was a partner in a firm, ITR-2 could be used if they didn’t have any other business income. “Now, such individual or HUF shall be required to file its return in ITR-3 only irrespective of it has any other business income or not,” adds Sehgal. The forms this time provide a separate column for claiming capital gain exemptions under Sections 54, 54B, 54EC, 54EE, 54F, 54GB and 115F.
Which ITR form is for you
The next step is to identify the form that you need to use to file returns. “If you are using a private tax filing portal to file your return, it will automatically choose the correct form based on your income and assets,” says Sudhir Kaushik, Cofounder, Taxspanner.com. However, if you are using the tax department’s portal, you will have to choose the form yourself. The I-T department has released seven forms this year – for salaried professionals or pensioners, the most relevant forms are ITR-1 and ITR-2. If you are a self-employed professional or run a small business, you should use ITR-4. Ensure that you mention your name in the manner it appears on your PAN card. “The return will not be processed in case there is a PAN name mismatch,” he adds. Do not forget to update your e-mail ID and mobile number so as to receive timely communication related to return and refund processing. Quoting Aadhaar is a must for resident taxpayers.
Verify TDS details in Form 26AS
To start with, access your Form 26AS – or tax credit statement – available on the e-filing portal and check whether the tax deducted by your employer and other deductors tallies with your Form 16 and TDS certificates. “All the tax credits for salaries and other income should be verified with 26AS. If there is any mismatch, it should be addressed to the employer or payer of such income,” says Sehgal. You can also access your Form 26AS through your netbanking account.
When you sit down to file your return, keep certain key documents at hand, including the Form 16 issued by your employer, bank statements to know the interest income, records of investments and donations made and a copy of returns filed last year. This will reduce the time consumed to file returns as also the scope for errors.
What to watch out for
Remember that only interest earned on savings bank account is exempt under Section 80TTA. Interest earned from fixed deposits and recurring deposits is fully taxable at the rate applicable to the individual. Also, TDS is only 10% of the interest earned on deposits. If the individual falls in a higher tax bracket, he will have to pay additional tax.
Many taxpayers may be tempted to ignore reporting the interest income. This can be a problem. If your Form 26AS shows TDS on interest income, the tax department will send you a demand for additional tax on the income.
Likewise, you must also ensure that you claim all tax benefits you are entitled for – even the ones you might have missed mentioning in the investment declaration submitted to your employer. Chief among these is donations made to charitable institutions, as employers usually do not account for deductions under section 80G.
Finally, do not delay e-verifying your return or dispatching the printed and signed ITR-V to the CPC in Bengaluru only by regular or speed post within 120 days of filing the return online.