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What is a "previous year"? What is an 'assessment year'? What
is meant by an assessee? every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the income of any other person in respect of whom he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person;
1. every person who is deemed to be an assessee under any provision of this Act. Who is an Assessing Officer (A.O.)? Who is a
"person " as defined under the Income Tax Act? 1. An individual What
are 'heads of income'? ......Salaries Do I need to
submit a tax return even if I have no taxable income? Do I have
to submit a tax return even if I am only a salaried employee?
i. You have a telephone registered in your
name What happens if I do not file a tax
return? 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? Top Is it just one
form or are there many forms that I need to fill out? Can
I fill out the form on my own or is it so difficult that I need a consultant? The form asks for my
Permanent Account Number. What is it? If I do
not have a PAN number will I get into trouble if I file a return? The
Saral form asks for my Ward name. How do I know which one I belong to? What do I state under the
head Income from salary? 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? 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 property, 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 Forth of the 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. Is
insurance premium paid to insure the property allowable as a deduction? Is
income from Superstructure built on leased land taxable as House Property Income? Is
the interest payable outside India allowed as a deduction u/s 24(1) while computing the
income from house property? Is
land revenue paid to the State Government in respect of property deductible u/s 24(1)? What about deductibility of
interest on housing loans? Top 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. If I have a side
business. How do I deal with this? 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. Aassets 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 table below.
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 installments of advance tax payable in relation to capital gains. Therefore, gains arising in each period should be separately indicated in the given space. Top What do they mean by income from
other sources? Top
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.
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.
Exemption of Rs. 40,000 is allowed for expenditure on treatment of protracted diseases 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.
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. 40,000 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.
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.
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.
How do I then compute total income?
Aggregate earnings from some specified sources are eligible for deduction upto of Rs.9,000 from the taxable income. 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.
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.
What then is the tax on total income? 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.
Have
I paid advance tax? 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? |