It’s Time To File Your Income Tax Return – Part 1

Most people usually get a little agitated and tense when it comes to paying the income tax or filing their returns. However, the actual process is quite easy if you make an effort to understand it. It is just the lack of awareness that makes everyone feel that filing a return is one of the most mind-boggling tasks ever undertaken. We at Dalal Street Investment Journal (DSIJ) have therefore taken the initiative to provide our readers with tips on how to go about filing a return as also other related issues. The article has been divided into two parts of which the first one deals with information and understanding the various aspects and the second part consists of a dummy example with a detailed explanation and the computation of tax.

An income tax return needs to filed by every individual who has earned income in a particular year through various sources like salary, business, professional fees, interest, capital gains, etc. Individuals usually get confused over various jargons, as for example, assessment year and previous year. One should understand that previous year means the year in which the individual has actually earned the income (currently 2011-12) and the assessment year is the year when that income is assessed (currently 2012-2013). The due for individuals to file their returns is July 31, 2012 and for corporates it is September 30, 2012.

First, an individual has to assess as to whether he is liable for tax. For this is he/she must add all the income earned during the financial year (this time it’s from April 1, 2011 to March 31, 2012). The following table will further help you to count your gross total income from all the sources. 

After arriving at the gross total income one must then subtract the deductions which are available in the form of exemptions so that the tax liability can be reduced. The following are the various deductions which are available for individuals. 

After deducting the deduction and exemptions from the gross income we get the net taxable income which is then taxed at various rates, as explained in the following table. 

An individual (male) is exempt from tax if his income is less than Rs 1,80,000 per annum. For income above this level, he is liable for tax which he needs to pay on or before July 31, 2012. After considering the net income there could be two probabilities i.e. either there is a tax liability or there is none. If he has to pay the tax than he can go to the nearest bank’s (any bank) branch where he needs to fill up the ITR 280 challan and present a cheque for the specified amount. One should note here that there is a BSR code which is of the most important things for filing a return.

Now comes the stage of actually filing the income tax return. Depending on the individual’s source of income i.e. salary, profit from business, professional fees or any other source, he would be liable to fill up the ITR (Income Tax Return) form. This can be done physically or even online from the Income Tax website. The person who has paid the tax would be required to fill up the BSR code which is mandatory. Those with zero tax liability will have no need to provide this code.

In case of physical filing the return, an individual needs to submit it to the nearest Income Tax Office (ITO) and get an acknowledgement. Those who have filed returns online are required to take a printout of the receipt, a copy of which has to be posted to the Income Tax Department’s central office at Bangalore.

We would further advise all our investors and readers to pay their taxes honestly and not avoid the same as it is beneficial for Indian economy. You could also take the help of chartered accountants and tax consultants before filing the income tax return. All individuals who have previously filed the IT returns and those who are liable to pay tax are compulsorily required to file their returns on time. Our second part will now provide an example of how to go about calculating the income and deductions so as to arrive at the tax liability.