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Sunday, 6 July 2014

Ways to File Tax Returns

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            Ways to File Tax Returns





STEP 01 CHECK YOUR TDS DETAILS

 

Start by reconciling the tax you have paid and the TDS details in your Form 26AS.


Before you get down to filing your tax return, you should check whether the tax you paid during the year has been correctly credited to you. You can do this by checking your tax credit statement. Also know as the Form 26AS, it has details of the tax paid by an individual. Any TDS linked to your PAN or self assessment tax paid by you during the year will reflect in this form. If you are a salaried taxpayer, you need to match the TDS details in the Form 16 from your employer with the details in the Form 26AS. If your bank or bond issuer has deducted tax on the interest income, it would be in this statement.

You can access the Form 26AS on the Income Tax department's e-filing portal (https://incometaxindiaefiling.gov.in/). When you click on "Check tax credit statement" you will be directed to the relevant page. First time users will have to register before they can log in and access their tax credit statement. But there is an easier way if you have a net banking account.


Just click on your tax credit statement and you will be directed to the Traces (TDS Reconciliation Analysis and Correction Enabling System) webpage without the hassles of registration.

 

If there is a mismatch in the details, you need to bring it to the notice of the establishment that deducted the tax and get the mistake rectified. Tax authorities use Form 26AS as the basis for issuing notices and refunds.


Therefore, you must verify the details in advance.

The Form 26AS should serve as a warning for taxpayers who, deliberately or otherwise, under-report their income in the tax return. Many taxpayers wrongly assume that if TDS has been deducted on the interest earned on fixed deposits and bonds, they don't have to pay any more tax. But TDS on bank deposits is 10% while the tax may be 30% if the person earns over `10 lakh. If he ignores the income from interest, the tax department will immediately find out. The TDS will reflect in the Form 26AS but the corresponding income will not be reported. "The Form 26AS will help a taxpayer identify and report the sources of income which he might have missed out.

 

Choose The Right Form


Most taxpayers falter at this stage because they don't know which form is applicable to them. The ambiguity in the rules only adds to the confusion.

The form to be used for filing your tax return is crucial. If you choose the wrong option, the return may get rejected. The frequent changes in rules of tax return filing has not helped matters much. The simple ITR-1 is the most used tax form, but many assessees may not be using it correctly. Last year, the Central Board of Direct Taxes had made it mandatory for taxpayers to use ITR-2 if their exempt income exceeded `5,000 a year.

This rule is open to a lot of interpretations. Going by the definition, exempt in come would include the allowances for house rent, leave travel, medical and transport. So, most salaried taxpayers would have to use ITR-2 instead of ITR-1. This exempt income should mean tax free maturity proceeds of life insurance policies, PPF, dividend income and EPF withdrawals and so on. However, if you were to go strictly by the wordings, you will have to include the basic allowances that form part of most salaried individuals' packages. Others feel that exempt income in this context only refers to earnings like dividend and agricultural incomes and not the allowances from employers.

 

Last year, many assessees who should have opted for ITR-2 because they had exempt income of more than `5,000 used ITR-1 for filing their returns. Though their returns were accepted, the same leeway may not be extended this year. The tax department has not issued any formal clarification on this matter.

One of the advantages of choosing a private portal is that it automatically chooses the correct form for you. As you enter the details of your income and the exemptions claimed, the portal processes your return using the appropriate form. But, as we will explain later, this convenience comes for a price.

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