Since she started working four years ago, Sudeshna Sinha, employee of a private textile firm in Calcutta, has been planning to file her tax returns. But each year the deadline ' July 31 ' comes and goes yet she doesn’t seem to “get around to it”. Says Sinha, “The thought of all that paper work and accounting just puts me off.” But she also knows that sooner or later she has to get down to it, since, as she says, “I am aware that it is mandatory for every bona fide, earning citizen of the country to do so.” But she also admits to not knowing the rules of filing tax returns, or the steps to take.
Sinha is not alone. Experts in the field of income-tax, including lawyers, consultants and chartered accountants agree that ignorance about regulations governing the filing of income-tax returns and the lack of knowledge of how to go about it prevent many people from filing their tax returns on time.
“As a tax consultant, I come into contact with many who erroneously think that it is a cumbersome process,” explains Tapati Bhattacharya, who is associated with the Institute of Chartered Accountants, “and they end up procrastinating. This only complicates matters because each year that you delay, you incur a fine or penalty.”
Calcutta-based chartered accountant Pradipta Biswas agrees. “Filing your tax returns is not as complicated as some think it is ' once you know the steps to take, that is.” First of all, he says, “You would have to find out if you are at all eligible to pay tax.”
While there are several categories of tax payers ' including companies, firms, individuals, etc., with each category having a different criteria as far as payment of taxes is concerned ' an “individual” is, as per Section 2, subsection 31 of the Income Tax Act, 1961 (ITA) “a person other than a company”.
As per the ITA, in the assessment year 2006-2007 (which assesses an individual’s previous financial year’s income, or his income during 2005-2006) an “individual” is required to pay tax when his annual income is Rs 1 lakh and above. Women are required to pay tax if their annual income is Rs 1.35 lakh and above.
However, tax consultants point out that there are ways in which you could reduce your taxes by availing of tax exemptions. One can avail of the options under section 80C of the ITA. Says tax consultant Akhilesh Mitra, “Under 80C there are different tax saving options in which one can invest up to Rs 1 lakh in any combination.” The tax saving instruments in this section include Life insurance policies (LICs), Unit-linked policies (ULIPs), Public Provident Fund (PPF), tax saving bonds and National Saving Certificates (NSCs). Under Section 24, you can get a rebate on the interest amount up to a maximum limit of Rs 1,50,000 a year. There are also rebates on the tuition fees for children’s education.
But wait! Before you start thinking that there is, after all, a brighter side to the depleted salary you command after all these deductions that you’ve been cribbing about, think again. Notes Biswas, “Even if you are exempted from paying tax, you are required to file your tax returns if your annual income meets the criterion.” According to ITA, the criterion is that your annual income (before claiming deductions) exceeds the amount of exempted income (which for men is upto Rs 1 lakh and for women upto Rs 1.35 lakh).
So what do you do now that you know that you are eligible to file your tax returns'
Senior tax manager, Sahadev Ghosh explains. “Once you know that you are eligible to file tax returns, the first step is to apply for your Permanent Account Number (PAN), which is a unique number assigned specifically to you by the income-tax authority.”
While you can apply for your PAN with the help of a chartered accountant or a tax lawyer, you also have the option to do so through any branch of the Unit Trust of India (UTI) or the National Securities Depositories Limited (NSDL). The PAN is sent to you through registered mail. Ghosh points out that salaried individuals should receive from his or her employer a tax-deducted-at-source (TDS) certificate (also known as Form 16) by April 30, which furnishes all details of income from salaries and tax deductions.
Then comes the most important step ' which is to obtain Form Number 2E or 3 (also known as Naya Saral and Saral, respectively) from your local income-tax office. It is also available on the Net and you can download it from the website, www.incometaxindia.gov.in. Biswas adds, “The difference between 2E and 3 is that the former is a less elaborate version of the latter,” and according to him, “you can use either of them to file your returns.” The final step, of course, is to duly fill in the form and submit it along with the TDS certificate in original at your jurisdictional tax office. Now, that was not so taxing, was it'
(With inputs from Aparna Harish)