The easy way to file tax returns

It's an annual ritual for most us. Come July, and there's the harried scramble to file our tax returns by the last day of the month. Most taxpayers will rush to banks to get receipts for tax deducted at source (TDS) and their account statements. The Income Tax Department will be flooded with PANrelated complaints. Some assessees will tweet, others will vent their angst on Facebook. The common grouse is almost always: "They Got My PAN Wrong...Again".

Filing returns, though, does not have to be so traumatic. A few simple steps can help you avoid the long queues of troubled taxpayers during the tax-filing season. First, find out if you need to file your tax returns. If your gross taxable income before deductions exceeded the threshold for 2009-10, you have to file the returns. But, then, what constitutes income? And what is the tax rate? It's not that difficult.

Just add up your income from different sources and subtract from it the various tax deductions available to you. Once you have found out your net taxable income, you can simply use a rate table to calculate your tax liability. Several websites like Taxspanner.com and taxsmile.com can do it simply for you.

DON'T MAKE THESE COMMON MISTAKES INCORRECT PAN Getting the 10-digit PAN wrong can attract notice from the taxman and a fine of Rs 10,000 for the slip-up. PAN is also required for other transactions. If you don't quote it, you end up paying a higher TDS rate of 20 per cent. Also, if PAN is not mentioned on the TDS certificate, it will be difficult to claim tax credit. INCOMPLETE AIR If you make a big-ticket investment or if your expenses cross a certain limit in a year, mention these in the Annual Information Return. Mutual funds, insurance firms, brokerages, credit card issuers and banks are supposed to inform the tax department if a client's transactions cross a certain limit. If their reports and your disclosures don't match, trouble lies ahead. DOUBLE DEDUCTION Did you change jobs during the year and get deductions from both employers? To avoid scrutiny of your returns, inform your new employer about previous income so that taxes are deducted accordingly. If you still haven't done this, recalculate your income and pay the outstanding tax along with one per cent interest for every month of delay. TREAT TDS AS TAX For several types of income, tax is deducted at source (TDS). This is not the end of it because TDS is about 10 per cent of the income even though the tax payable by the individual could be much higher at 30 per cent.

Not much has changed since July 2009 in the way you file your tax returns. The only major variations are the introduction of the Saral-II (or ITR-1) form and the broadening of its applicability. The two-page Saral-II is no different from the ITR-1 used till last year. The difference is that, till last year, those who had rental income from a house or capital gains had to use ITR-2.

Now, those who have income from only one house or tax-free capital gains can use the Saral-II form. This should be good news for taxpayers who had to wade through the eight-page ITR-2 just because they had a modest rental income or longterm capital gains from equities. "This change is likely to result in many ITR-2 users shifting to ITR-1 from this year," says Ankur Sharma, Director, Taxspanner.com.

A small, but significant, change is the way the government has been trying to make life easier for the tax-payer. It is using technology to weed out the problems faced by the average person while dealing with the tax department. The refund banker facility under the Sevottam scheme, introduced a few years ago, ensures that excess tax paid is refunded to the taxpayer within a few weeks of the filing of the return. The tax refund is credited to the taxpayer's bank account.

Of course, this is possible only if you have filled in your bank details correctly in the tax-return form. These include your account number and the nine-digit MICR code that identifies your bank and branch. "If the bank details are filled in correctly, it usually takes 6-8 weeks for the tax refund to be credited to your account," says Bharat Bhushan, a Delhi-based tax and investment consultant.

What's more, you can now check the status of your tax refund online. Simply log on to incometaxindia.gov.in, click on the 'Status of Tax Refund' on the home page, key in your PAN, choose the relevant year and you will know whether the assessing officer has sent your refund or there is some problem.

The establishment of the first Aayakar Sewa Kendra or ASK in Pune last year, is another people-friendly milestone towards addressing the grievances of taxpayers. Taxpayers may e-mail their problems to ask@incometaxindia.gov.in, where income tax officials will scrutinise the complaint and redress it in a time-bound manner.

Encouraged by the response, the Central Board of Direct Taxes has set up two more ASK units at Kochi and Chandigarh. Incidentally, the Bureau of Indian Standards has conferred the ISO 15700:2005 certificate for excellence in public delivery system on CBDT and the Income Tax Department for the Sevottam scheme and ASK.

More such ASK units are being set up. The refund banker scheme covers 15 cities now and is being expanded to cover the entire country. "Technology is being introduced so that the Income Tax Department can enhance its capacity to handle the increase in the number of taxpayers and provide better services in a systematic manner," said Finance Minister Pranab Mukherjee at the inauguration of the Centralised Processing Centre of the tax department in Bangalore, in May.

However, Mukherjee's words appear a little too optimistic when you browse through the government website. For one, the tax department has not been updating vital information. The government site still does not have the latest tax rates applicable for the previous financial year (assessment year 2010-11).

The Taxpayers' Information Booklet gives the rates applicable for assessment year 2008-09 even though the tax filing season has begun. Given that many taxpayers tend to be confused between financial year and assessment year, the government website needs to update the information that millions accept as gospel truth.

One way to avoid making mistakes in your tax returns is to use the services of an e-filing portal. These sites calculate your tax, help you fill in the form and file your returns. Some of these are so easy to use that they are virtually foolproof.

With the tax-filing deadline nearing, it is high time you collected details about financial transactions in 2009-10. Though the new tax forms do not require you to attach documents with the return, you still need them to fill the form. For instance, if you have income from salary, pension and interest, you need to mention the Form 16 and the interest details.

If you have other sources of income, you need to fill in details about rent received, dividends, capital gains, deductible expenses, etc. To fill the annual information return (AIR) section in the taxreturn form, you need your bank account, credit card and mutual fund statements, fixed deposit receipts and details of purchase of immovable property. Also, remember that the assessment year is printed on the form, so a specific form will have to be downloaded for each year.

Regarding tax deducted at source, it has recently been made mandatory to include the receipt number on TDS certificates - this number needs to be mentioned in the tax return. However, the CBDT has clarified that this change will not be applicable for returns being filed this year. Of course, if all your taxes for 2009-10 are paid in full and there is no refund due from the Income Tax Department, there is no pressing need to file your tax returns immediately.

You can do so any time before the end of the assessment year. And July 31 this year can be just another Saturday for you. The only problem is that you will not be able to revise the returns if they have not been filed by the due date. Nor will you be eligible for any refunds.

Courtesy: Money Today