Funda of Filing IT Return

Are you one of those who have not filed their income tax returns by July 31, 2009? If yes, then you must be wondering what you should do now. If you are a salaried person, you don’t have to worry about not being able to file your IT return by the last date. You can file your return on or before March 31, 2010.

As per IT department’s rules, salaried employees and professionals whose income does not need auditing are required to file their tax returns on or before July 31 every year. On the other hand, persons whose income needs to be audited have to file their returns on or before 30th September every year. But there is nothing to worry if you fail to file your tax return by the last date (31 July), provided you have paid all the taxes by the due date, in which case you can file your tax return on or before March 31 next year – that is, tax return for 2008-09 can be filed on or before March 31, 2010 without attracting any penalty. However, after this extended deadline, you may have to pay a penalty of upto Rs 5,000 to file your returns, if the assessing officer is not satisfied with the reasons for the delay. Also, if you do not file your returns by the last date (July 31) you cannot carry forward any capital losses that you may have incurred during the last financial year. But what happens when a taxpayer has neither paid tax (fully or partially) before the due date (March 31) nor filed his return before the last date (July 31)? In such a case, he will have to pay the outstanding amount of tax along with penal interest of one per cent per month of delay and hope that the assessing officer would be lenient and not impose any penalty. If a person has not filed IT return for, say, 2006-07 or earlier years, he cannot do much about it as after two years, it becomes time-barred.

Paying Your Income Tax
The deadlines discussed earlier related to the filing of IT return. But what about the deadline for paying income tax? The income tax for individuals is payable on or before the close of financial year on March 31. Of course, the salaried employees’ income tax gets deducted and deposited every month by the employer, so employees have nothing to worry about paying income tax by the deadline. Failure to pay the tax by the due date will attract interest at one per cent per month on the outstanding amount.[PAGE BREAK]

Which income is liable to tax?
Any income received by an individual during the last financial year is liable to be taxed, subject to the basic exemption limit. Such incomes includes salary received from employer, which may consist of basic salary/wages, commission, bonus, incentives and the value of all the perks received by the employee. Income also includes pension received by the pensioners, including annuity received from mutual fund and insurance companies. Interest received on fixed and recurring deposits, debentures, bonds, savings bank account, National Savings Certificates, Kisan Vikas Patras as also dividend income from shares, lottery and game show winnings and value of gifts received is also taxable. Profit made from business and income earned as professional fees are liable for tax. Also, profit from sale of property, stocks, mutual funds and other assets are taxable as these constitute capital gains. Rental income from house property is also taxable, after allowing for 30 per cent standard deduction.

Exemption Limit
Of course, not all income received is taxable – only income above a certain minimum limit is taxable. For FY2008-09, the exemption limit for men is Rs 1.50 lakh per annum (Rs 1.80 lakh for women and Rs 2.25 lakh for senior citizens above 65 years of age), so men whose income was less than Rs 1,50 lakh in FY2008-09 need not pay any tax. However, if the annual income of a man exceeded Rs 1.50 lakh (Rs 1.80 lakh for women and Rs 2.25 lakh for senior citizens) in 2008-09, then he would be liable to pay tax on the amount exceeding the exemption limit and would be also required to file income tax returns (ITRs) every year.

Which ITR Form?
The first question which a taxpayer has to face is which IT form he is required to fill up and submit to file his IT return. For individuals, there are five types of forms, viz. ITR-1, ITR-2, ITR-3, ITR-4 & ITR-5 (refer box). As is evident, ITR-1 should be filled up by persons having income from salary, pension and interest income, ITR-2 is to be filled up by persons having rental income from house property, capital gains, dividend or royalty income, etc. ITR-3 is for partners of partnership firms, while self-employed professionals and those deriving income from business, consultancy or professional activity have to fill up form ITR-4. The ITR-5 form is to be used by all taxpayers for getting acknowledgement from the IT department.[PAGE BREAK]

Modes of Filing Returns
Returns can be filed in three ways: fully manual, part online part manual and fully online. It is revealing to know that despite availability of online facilities, about 84 per cent of the individual taxpayers still prefer to file their tax returns manually. The biggest hurdle to online filing is the mental block of taxpayers who are apprehensive about filing online the tax returns themselves and prefer to rely on the tried and tested method of getting it done through their accountants.
However, the number of taxpayers filing tax returns online has been increasing steadily over the years and that is the way things will move going forward. “Every year India adds a number of new tax filers to its tax base. These are usually young, computer savvy and familiar with completing tasks on the internet. India has a good potential of achieving a very high growth of e-filing in the years to come on the strength of its young work force and the improving internet connectivity,” says Amit Samaddar, Head of Operations of Taxshax.com.

“The government is very supportive of e-filing concept and has made significant changes in processes to ensure that e-filing benefits the taxpayers,” says Ravi Jagannathan, MD & CEO, 3i Infotech Consumer Services which runs the taxsmile.com e-filing tax portal. But the government needs to do more. “The income tax department has been steadily making the process of e-filing simpler (such as the single location for submission of all ITR-V by post). However, they could simplify the process of website to website connectivity - so that individuals using e-filing need not use either a digital signature or need to submit that one piece of paper - ITR V. This would require one or more on line security checks for online filers and the job can be even more simplified - especially for returning e-filers. The US has done away with either of these two requirements and the popularity of e-filing has increased exponentially,” says Samaddar.[PAGE BREAK]

Taxpayers may opt for filing return part online and part manual. In this method, the taxpayer has to fill up all the details online, while the manual part consists only of filling up the ITR-5 and submitting it to the local tax office or mailing it to the IT Department’s Bangalore office within 30 days of filing return online. It should be noted that ITR-5 has to be sent only by ordinary post to the Bangalore office. Remember, if you send ITR-5 through courier, speed post or registered post, it will not be accepted. You can file the IT return fully online only if you have a digital signature. To file, you have to fill up ITR-1 online, make an xml file and submit it along with your digital signature, after which an acknowledgement will be generated which is a proof of your filing the IT return.

The advantages of filing returns online are many. Elaborating on advantages of e-filing, Samaddar says, “Firstly, there is 100% guaranteed accuracy - the pack-age is designed and tested by experts hence there is no scope for computational inaccuracies; secondly, it’s speedy as the whole task can be finished in 15 minutes; thirdly, there is no need to have any knowledge of our complex income tax laws - experts have taken care of all that and have incorporated the same in the software; fourthly, the interface is very simple - users just need to answer simple straightforward questions and the task is done; fifthly, one can have better management of personal finances using a comprehensive tax planning tool; and lastly, it provides better organization of personal tax records.”

Elaborating further, Ravi says “One can file return at her or his convenient time and place, and it helps one under-stand the income tax relating to his or her income and plan the tax savings better, eliminates the data capturing process by IT department and thereby results in faster processing of returns and refunds, avoids identity theft as the data is not available on paper and contribute to environment by not using paper to file IT return”

Filing IT Returns Online
Now, let us look at the services offered by some of the popular portals offering e-filing of IT returns and their charges. Some of the popular websites offering online tax filing services include taxsmile.com, taxshax.com, taxspanner.com and incometaxindia.gov.in, the last one being IT Department’s website. The IT department’s website offers services to all taxpayers (individual, business, corporate) free of cost, but it does not have the facility to calculate taxes like other portals.

For filing online on portals such taxsmile.com, taxspanner.com, taxshax.com, the first thing you need to do is to choose the package you wish to avail. Taxsmile.com offers two packages: Silver costing Rs 250 plus taxes, or [PAGE BREAK]

Gold costing Rs 400 plus taxes. “For Gold, the customer can either avail digital signature or we will provide ITR-5 pick up and filing services, in addition to Silver package services of tax return preparation and filing services,” says Ravi. Taxspanner.com offers three packages, with the basic package costing Rs 249, medium package costing Rs 449 and the premium package costing Rs 749. Taxspanner’s premium package offers the services of an expert to review your tax return, email and e-file return. Taxshax.com too offers three packages, with its basic package costing Rs 181, silver package at Rs 324 and gold package costing Rs 524. With taxshax.com, one can get reply to all tax-related queries within an hour.

Once you choose the package, you will have to register yourself by creating a user ID and password. Thereafter, you have to key in the requisite information in the required format (the portal will guide you on where to get the information in Form-16). Once you have filled up all the relevant details, you have to pay up the requisite charges (depending on the package you have opted for) either through net banking or by cheque, demand draft or credit card. After making the payment, you have to click on e-file. If you are filing through the IT department’s website, you have to save the return offline and upload it on the IT department website. If you have digital signature, you can add it and take a printout of ITR-5 with the digital signature. Your return has now been filed. However, if you do not have digital signature, you will have to take a printout of ITR-5, fill up the details, sign it and submit it at your local IT ward office or send it by ordinary post to the IT department’s office at Bangalore (see box for full address). If you submit it at the local IT ward office, make sure to get an acknowledgement immediately, and if you send the ITR-5 to Bangalore office, you should get an acknowledgement by post. Only when you get an acknowledgement from the IT department, you will have conclusive proof that your return has been submitted. Now that you know how to do it, what are you waiting for? The last date is already gone. Now, go ahead and e-file your IT return before March 31, 2010.