Wednesday, March 6, 2013

How to File Income Tax Returns? - 5 Must Dos.

Filing Income Tax returns is one of the activities about which there is lot of anxiety among lot of people .  We need to understand that while filing ITR is important and necessary , it is also important that we do so correctly . So what are the things that you should keep in mind while filing ITR.
1. File ITR within specified time - The first things that you must ensure is that you file the ITR within the specified period and not delay it. Any delay in filing ITR ( especially wehere you have to pay taxes ) may attract penalty from the Govt .  And  as such , sticking to the timeline is a great idea.

2. Disclose all incomes - The most common mistake tax payers make is failing to report all the sources of their income. One type of income that is forgotten by many individuals is interest earned on a bank savings account and on Fixed Deposits (FDs). This income is taxable according to your respective tax slab. Usually banks deduct 10 percent as Tax Deductible at Source (TDS) on the interest income earned on FDs. However, if you fall under a higher tax slab of say, 30 percent, you are liable to pay tax accordingly. Not reporting these incomes might attract a notice from the income tax department.
In addition, if you have changed your job recently, make sure that you report the income earned through your previous employer as well.
Also, any income earned by a minor through investments is taxable according to the tax slab of the parent with higher income. The income of the minor is clubbed with that parent’s income while computing net taxable amount. In case you have made investments in your children’s name, keep this in mind while filing your taxes.

3.Paying tax on House Property - Lot of people assume that there is no tax to be paid on house property . While the truth is all house property owned by the person attracts tax and one needs to pay the same.

4.Filing details of income which is tax exempt - Some people assume that we have to file details of income where there is tax liability and as such do not disclose incomes which are tax free. For example, Long Term capital gains out of equity invetsments , dividends received etc are tax free but still need to be disclosed in your tax returns. This reflects your total income accurately and removes any chances of receiving any notice from Income Tax Dept since most of the AMCs, brokerages  etc from where you receive this income will anyway report this to the authorities.

5. Give Correct email Id and Postal Address : Since all the necessary information is communicated by the income tax department via email or post, it is extremely important to enter these details correctly before filing your taxes. A minor mistake in filling these details means that you may miss important notifications. So check and re-check your postal and email address when you file your income tax.

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