| |
Resident and ordinarily
resident |
Resident and
not
ordinarily resident |
Non-resident |
| Income received in India |
Yes |
Yes |
Yes |
| Income deemed to be received in
India |
Yes |
Yes |
Yes |
| Income accruing or arising in
India |
Yes |
Yes |
Yes |
| Income deemed to accure or arise
in India |
Yes |
Yes |
Yes |
| Income received/ accured outside
India from a business in India |
Yes |
Yes |
No |
| Income received/ accured outside
India from a business controlled Outside
India |
Yes |
No |
No |
Do I have
to submit a tax return even if I have no taxable income ?
Yes, you do. You will still have to
file a return. Nobody can escape filing a tax return sooner or
later.
Do I have to submit
a tax return even if I am only a salaried employee ?
Yes, you do. It does not matter that
you are a salaried employee whose taxes are fully deducted at
source anyway. You will still have to file a return.
What happens if I
do not file a tax return ?
Where, as a result of failure to
file the return, the tax evasion exceeds Rs. 1 lakh, the
penalty is a fine and imprisonment that could vary in term
between 6 months to 7 years. In other cases, it could be a
fine and imprisonment of 3 months to 3 years.
Over and above this, Sec. 271F
imposes a penalty of Rs. 1,000 for late furnishing of returns
in normal cases and Rs. 500 for those which fulfill certain
criteria.
Also, if the income under business,
profession, capital gains or house property is a loss, the
return must be filed within the prescribed time limit.
Otherwise the benefit of carry forward of loss is not
admissible.
Where can I obtain a form ?
Ask around in the Accounts
Department If you are a salaried person, you will fill out a
form called Saral and which in official lingo passes as Form
2D. This form is essentially meant for individuals, more
specifically, assessees other than companies and persons who
are claiming exemption under Section 11.
Is it just one form or are there
many forms that I need to fill out ?
There is only one form. Saral
consists of 31 items and a basic declaration from you . The
form has to be submitted in duplicate. That means you need to
submit two copies of the same form. The person at the counter
will return one of the copies duly acknowledged. You should
preserve this carefully.
Can I fill out the form on my own
or is it so difficult that I need a consultant ?
The form, Saral, has never been more
simple. Of course it could be simpler but the finance minister
cannot be faulted for not trying. If you are finding it too
difficult, log on to myiris.com and check out for live chats
with our panel of tax experts.
The form asks for my Permanent
Account Number. What is it ?
It is a number unique you, ten
characters long. Allotted to you by the Income Tax department,
it will help identify you throughout your entire life as an
Indian citizen. You will get a card with your photograph on it
with details alongwith pertaining to you including your
Permanent Account Number (PAN), your date of birth, your
father's Name along with your name and signature.
If I do not have a PAN number
will I get into trouble if I file a return ?
No. You will get into trouble only
if you do not file a return. You will also get into trouble if
you have not applied for a PAN if you meet any of the criteria
that makes it mandatory for you to have a PAN. It is best that
you file your return and apply for a PAN immediately if you
have not done so already.
The form asks for my Ward name.
How do I know which one I belong to?
Your office accounts department can
help you find out this information.
What do I state under the head-
Income from salary ?
Your office accounts department will
in due course give you a document called Form 16. It is
basically a summary of your income from all sources including
salaries and the deductions that you are eligible for. The
gross amount of salary inclusive of taxable value of the perks
is to be taken directly from Form 16. Take care to attach form
no.16. Without it the return would be considered
irregular.
Just remember to include the
deductions allowed. There is the ad hoc deduction allowed
called Standard deduction, The Professional tax that you pay
is also deductible.
How do I deal with Income from
House Property ?
Now this gets slightly complicated.
What you are doing with your property will determine the tax
treatment. If you are living in your own home, the tax
treatment will be different from when you are using it for
business or a profession.
The owner, or the deemed owner of a
house property, inclusive of the appurtenant land, is taxed on
the ‘annual value’ of the property under the head ‘income from
house property’. Where the house property is used for carrying
on any business or profession, the income is not treated as
income from the house property, but as business
income.
The annual value of a self-occupied
property is taken as ‘nil’. Where there are more than one such
self-occupied properties, only one property, as per the choice
of the assessee can be taken at nil value. All others will be
treated as let out.
Where the annual value is taken as
nil, all the deductions allowed on let-out property other than
the interest on borrowed capital, are not allowed.
Where there is more than one house
or in the case of let-out property, the ‘gross annual value’
is the maximum of (i) municipal ratable value (ii) actual rent
if the property is let out and (iii) fair rent. The ‘net
annual value’(NAV) is arrived at by deducting municipal taxes
actually paid during the year.
From this NAV, the following
deductions are permitted :
a) One-Fourth of NAV is deductible,
for repairs and rent collection charges irrespective of the
actual expenses incurred.
b)Expenses on (i) Insurance premium
(ii) ground rent (iii) annual charge, not being a capital
charge and not being a voluntarily created one (iv) land
revenue (v) irrecoverable rent and (vi) State tax.
c)In the case of a let out property,
vacancy allowance is deductible if it remains vacant during a
part of the year. The amount deductible is that part of the
NAV (not annual rent) on a pro-rata basis. This deduction is
however not admissible if the property remains vacant
throughout the fiscal year. It has to be let out for some part
of the year, even for one day.
What about deductibility of
interest on housing loans ?
If the property has been acquired,
constructed, repaired, renewed or reconstructed with borrowed
capital, the interest payable is deductible. In the case of
let out properties, the entire interest payable can be set
off. In the case of self-occupied property interest is
deductible up to Rs. 75,000 but only on capital borrowed after
1.4.99 and if the acquisition or construction of the property
is completed before 1.4.2001. This terminal date has been
raised to 1.4.2003 and the amount of interest deductible to
Rs. 1,00,000 by the last Finance Act. The 2001-02 budget
raises this deduction further to Rs. 1,50,000.
Then again, this relief is allowed
only when the income from house property becomes chargeable to
tax. In other words, the construction should be complete, the
flat should be ready for occupation and the municipal annual
value is known.
Take care to disclose the address of
the property, its nature - whether let out or self occupied,
and the computation of net income by way of a separate
annexure.
I have a side business. How
do I deal with this ?
This is fairly straight forward.
Remember to attach annexures stating the computation of income
from the business or profession, the profit and loss account,
balance sheet with the relevant enclosures, including
auditor's certificate along with the return. Take care to
suitably modify and adjust any disallowable expenses, claims,
brought forward losses,depreciation etc., if any, to arrive at
the accurate taxable profit or deductible loss if any.
What is the treatment of capital
gains ?
Though only the net
amount of capital gain is to be shown in the form, the
calculation thereof and the details such as the description of
the transferred asset, its cost of acquisition, the date of
acquisition, date of transfer, value of consideration,
adjustment of brought forward losses if any, etc., should be
indicated in a separate annexure.
Also, short-term and long-term gains
have to be seperately classified. A short-term asset is one
which is held for 36 months or less immediately preceeding the
date of transfer. Assets held for more than 3 years are
consequently long-term. However, equity shares, units of
UTI/MFs and listed scrips, bonds, debentures etc. are
considered as long-term assets if held for more than 12
months.
For computation of long-term capital
gains, the assessee has two options.The first one is to
calculate the difference between the cost of acquisation and
the sale price and tax the same at a flat rate of 10%.The
other option requires the assessee to pay tax @20%. However,
in that case, the cost of the asset sold can be adjusted for
inflation. Starting with the base year as FY 81-82, the RBI
notifies the ‘Cost Inflation Index’ every year as given in the
following table.
Table-1 : Cost Inflation
Index
|
Financial
Year
|
Inflation
index
|
Financial
Year
|
Inflation
index |
|
1981-82 |
100 |
1991-92 |
199 |
|
1982-83 |
109 |
1992-93 |
223 |
|
1983-84 |
116 |
1993-94 |
244 |
|
1984-85 |
125 |
1994-95 |
259 |
|
1985-86 |
133 |
1995-96 |
281 |
|
1986-87 |
140 |
1996-97 |
305 |
|
1987-88 |
150 |
1997-98 |
331 |
|
1988-89 |
161 |
1998-99 |
351 |
|
1989-90 |
172 |
1999-00 |
389 |
|
1990-91 |
182 |
2000-01 |
406 |
Short-term capital gains has the
nature of normal income. Hence is added to normal income for
calculation of tax. However, long-term capital gains are taken
as a separate block and charged to tax at a flat rate of 20%.
On this, the assessee does not get any deduction u/s 80L, 80D
etc., or the rebate u/s 88. However, tax rebate u/s 88B for
senior citizens is certainly applicable.
The dates 15th September, 15th
December, 15th March are basically the deadlines for payment
of advance tax payable ((discussed subsequently) in relation
to capital gains. Therefore, gains arising in each period
should be separately indicated in the given space.
What do I report under the
head "income of any other person" ?
Certain actions of assessees
give rise to the clubbing provisions of the Act. For example,
income from investment gifted to spouse or minor children has
to be included and taxed in the assessee’s own hands. Any such
items have to be clearly stated and shown
here.
What do they mean by income
from other sources ?
Net income from other sources such
as interest, income from UTI/MFs, interest on bank FDs etc. is
what the tax man has in mind. Even though the most common
income sources such as dividends from shares and MFs or even
UTI are completely exempt from tax, it is still necessary to
lay out details of such incomes in a separate annexure to be
attached with the return.
What are the deductions under
chapter VI-A referred to in the form ?
Some of the more relevant deductions
applicable to the common person in daily life, subject to the
proviso that the aggregate amount of deductions should not, in
any case, exceed the gross total income, are as
follows.
Mediclaim : Sec.
80D
Deduction upto Rs. 10,000 is allowed
in respect of medical insurance premiums paid by cheque by an
individual to benefit the assessee and dependent family
including spouse, children, and parents. The same benefit is
also available to an HUF for its members. For senior citizens,
the deduction is raised to Rs. 15,000. However, premiums paid
by senior citizens for covering health of their children,
dependent or otherwise, are not eligible for the deduction.
Handicapped Dependent : Sec. 80DD
Following the merger of Sec. 80DDA
with 80DD, the total deductible amount was raised from Rs.
35,000 to Rs. 40,000. Sec. 80DD stipulated that a resident
individual or a member of HUF having a dependent relative who
suffers from a permanent physical disability (including
blindness) or mental retardation was entitled to a deduction
of Rs. 20,000 in a year for medical treatment, training or
rehabilitation.Payment to LIC’s ‘Jeevan Aadhar’ and UTI’s
‘Special Plan for the Handicapped’ specially designed for such
persons was covered by Sec. 80DDA, offering a deduction of Rs.
15,000. Deduction under section 80DD is statutory in nature
and is allowed in full, irrespective of the actual expenditure
incurred on medical treatment.
Treatment of protracted diseases:
Sec. 80DDB
Exemption of Rs. 40,000 is allowed
for expenditure on treatment of protracted diseases (spelled
out) to an individual for herself or a dependent relative and
to an HUF for any of its members. For senior citizen, this
limit would be Rs. 60,000. However, any amount received by way
of medical insurance has to be subtracted for arriving at the
eligible deduction.
Loan for Higher Education : Sec.
80E
Repayment of loan as well as
interest thereon by an individual taken from a bank, a
notified financial institution or any approved charitable
institution for higher education is deductible upto a ceiling
of Rs. 25,000 (raised to Rs. 40,000 this last time around) per
year for 8 successive years. Loans given by employers are not
eligible. Higher education means studies for any graduate or
post graduate course in engineering, medicine or management or
a post- graduate course in applied or pure sciences, including
mathematics and statistics.
Donations : Sec.
80G
An assessee is entitled to a
deduction of 50% (and in some cases 100%) of donations made
for approved charitable purposes. These donations must be in
the form of money and not in kind, unless the donor is the
manufacturer of the items donated. Some of these funds have an
aggregate ceiling of 10% of gross total income, as reduced by
the standard deduction under Section 16(i) as well as
professional tax under Section 16(iii) and also by other
permissible deductions under Chapter VI-A.
Accommodation expenses: Sec.
80GG
All assessees, including employees
not getting HRA, paying rent for furnished or unfurnished
accommodation in excess of 10% of their total income are
entitled to a deduction of least of i) rent in excess of 10%
of total income; ii) 25% of total income and iii) Rs. 2,000
per month. The deduction is not available if the accommodation
is i) owned by the assessee or his spouse or minor child or
the HUF of which he is a member at the place where he normally
resides or has her office, employment, business or profession
or ii) owned by him at any other place and occupied by him.
The assessee is required to file a declaration in
Form-10BA.
Interest and Dividend : Sec. 80L
Aggregate earnings from some
specified sources are eligible for deduction upto of Rs.
15,000 from the taxable income out of which Rs. 3,000 was
specially earmarked for government securities and UTI/MFs.
However, now that UTI/MF(on equity schemes) income has become
tax-free and since individuals do not normally go in for
government securities, this special limit often goes
unutilised. The schemes are :
* Deposits with a) Banking Company
or Co-operative Banks b) Co-operative Societies c) Approved
financial corporations or public companies to provide
long-term finance for industrial or agricultural development
or for construction or purchase of residential houses; (the
‘Home Loan Account Scheme’ of National Housing Bank is not
covered by Sec. 80L but it enjoys the benefit of tax rebate
u/s 88), d) Industrial Development Bank of India and e)
Housing Boards.
* Small Savings Schemes —- a)
National Savings Certificates VIIIth issue b) Post Office Time
and Recurring Deposits c) National Savings Scheme, 1992 and d)
Post Office Monthly Income Scheme.
* Notified debentures of
co-operative societies or institutions or public sector
companies.
Physically Handicapped Person :
Sec. 80U
A resident, who, at the end of the
previous year, suffered from a permanent physical disability
(including blindness) or was mentally retarded, which had the
effect of reducing substantially her capacity to engage in
gainful employment or occupation is entitled to an ad hoc
deduction of Rs. 40,000. This deduction can be claimed,
irrespective of the expenditure on the treatment or the
duration of the disability. All that is required is to furnish
a certificate, procured from practitioners working in
government hospitals or specified associations for handicapped
persons, in support of the claim in the first year for which
the deduction is claimed.
How do I then compute total
income ?
. The ‘total income’ means income
arrived at after giving effect to all the deductions but
before this particular deduction. Most of the deductions
having a ceiling have similar stipulations.
What are tax rebates and how do I
claim them ?
Rebate is a deduction from tax
payable. Since these are the best tax-slashing devices, it is
absolutely essential to have a clear, concise and complete
insight into these.
Tax Rebate under section 88
Contributions out of income
chargeable to income tax by an individual or HUF to some
specific schemes (see Table) qualify for deductions from tax
payable at a flat rate of 20% of the contributions made. The
aggregate contribution to all these schemes qualifying for
deduction is subject to a ceiling of Rs. 60,000.
Schemes Eligible for Rebate u/s
88
| |
Savings Scheme |
Maximum Limit |
|
1 |
Life Insurance Premiums |
No limit |
|
2. |
Recognised Provident Fund |
No limit |
|
3. |
Family Pension Scheme |
Within prescribed limits |
|
4. |
16-yr Public Provident Fund |
Rs. 60,000 p.a. |
|
5. |
10/15-yr Unit Linked Insurance Plan |
Rs. 75,000 target amount |
|
6. |
10/15-yr Dhanaraksha |
Rs. 75,000 target amount |
|
7. |
National Savings Certificate - VIII |
No limit |
|
8. |
National Housing Bank |
No limit |
|
9. |
National Savings Scheme-92 |
No limit |
|
10. |
Jeevan Dhara/Jeevan Akshay of LIC |
No limit |
|
11. |
Equity-Linked Tax-Saving Schemes |
Rs. 10,000 |
|
12. |
Retirement Benefit Plan of UTI |
No Limit |
| |
Instruments of Infrastructure Companies
|
Each of these schemes attract an extra
ceiling of Rs. 10,000. |
| |
Units of MFs Dedicated to
Infrastructure |
| |
FI Bonds Dedicated to Infrastructure
|
For an individual who is an author,
playwright, artist, musician, actor, sportsman or athlete, the
qualifying ceiling is higher at Rs. 70,000 and so is the rate
of tax rebate at 25%. The only condition for applicability of
the extra concession is that the income from profession should
be more than 25% of his total income. Here, capital gain is
taken as a part and parcel of the total income inspite of
treating it as a separate block of income.
Sec. 88 and House Property
Any payment made by an individual or
HUF towards cost of purchase or construction of a residential
house, (not necessarily self-occupied) qualifies for the
deduction up to Rs. 10,000 (raised to Rs. 20,000 in the latest
budget) subject to the overall monetary limit of Rs.
60,000.
Such a house is required to be held
for a minimum period of 5 years from the end of the financial
year in which its possession was taken. If the house is sold
earlier, aggregate rebate claimed shall be added to the tax
liability on normal income of the assessee for the year during
which the house is sold.
How is agricultural income
treated ?
Agricultural income is not taxable.
However, where an assessee has other income, it will be
aggregated only for the rate purpose.
What then is the tax on total
income ?
How much do you actually pay? The
surcharge @12% on tax computed after taking into account
deductions and rebates will be levied if the net total income
is over Rs. 60,000. For income over Rs. 1,50,000 p.a., the
rate of surcharge is 17% on the top rate of 30%. Marginal
relief would be provided to ensure that the total tax payable
along with the surcharge, on excess of income over Rs. 60,000
is limited to the amount by which the income exceeds Rs.
60,000.
No surcharge is payable by NRIs.
Surcharge is applicable to i) normal
tax ii) advance tax iii) tax on long-term capital gains iv)
Tax Deduction at Source (TDS) and v) the dividend tax payable
directly to the exchequer before dividend is paid by the
companies to their shareholders and by the MFs to their
unitholders.
Income Tax Rates - Individuals &
HUFs
|
Net Taxable Income Slab Rs. |
Tax at Minimum Rs. |
Marginal Rate % * |
|
Under 50,000 |
Nil |
Nil |
|
50,000 - 60,000 |
Nil |
10 |
|
60,000 - 1,50,000 |
1,000 |
20 |
|
Over 1,50,000 |
19,000 |
30 |
*Plus Surcharge
Have I paid advance tax ?
If you have followed the rules, you
have. All taxpayers are required to pay advance tax in spite
of the fact that most income is subject to TDS or is
tax-free.
If the tax payable for the year is
Rs. 5,000 or more, advance tax is payable in 3 instalments
during each financial year as follows :
On or before 15th September : 30% of
estimated tax.
15th December : 60% less tax already
paid.
15th March : 100% less tax already
paid.
In the case of shortfalls of the
first two instalments of advance tax, simple interest @1.5%
per month is charged for 3 months (when the next instalment
falls due) on the amount of shortfall of 30% or 60%. Even if
the delay is just by one single day, the interest is payable
for 3 months.
But what if I had unanticipated
income and capital gains ?
In this case, you are forgiven.
Accordingly, no interest would be charged in respect of any
income, which was neither anticipated nor contemplated,
received after the date of first or subsequent installment of
advance tax. However, it would be necessary to pay advance tax
on such income at the next due date for advance
tax.
| 